How young adults are faring in America’s twenty-five biggest metro areas.

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With housing prices and job numbers rising, many commentators have begun to talk about the “recovery,” with the “crisis” relegated to the past. But a crisis certainly remains, according to new research by the Social Science Research Council’s Measure of America project, for our nation’s 5.8 million “disconnected youth”—the one in seven Americans between the ages of sixteen and twenty-four who are neither working nor enrolled in school. This cohort, whose numbers were stable for a decade, surged by 800,000 after the Great Recession and includes not only children from poor and minority families but significant numbers of white, middle-class youth as well.

The consequences are dire for these young Americans. They’re not only more likely to have a hard time in the job market; researchers have found that disconnection has scarring effectsÂ on health and happiness that endure throughout a lifetime. Unemployed, uneducated youth are at greater risk for criminality and incarceration, and they often go on to become unreliable spouses and improvident parents.

The costs to society are also considerable. The direct support expenses and lost tax revenues associated with disengaged young people cost U.S. taxpayers $93 billion in 2011 alone—a bill that will only compound as the years progress.

But youth disconnection differs substantially across the country. The table below, based on data from the Measure of America report, shows the shares of disconnected youth for America’s twenty-five largest metro areas. Eight of the ten areas with the highest levels of disconnected youth are in the Sun Belt, including Charlotte, Atlanta, Tampa, Phoenix, and Riverside-San Bernardino in Southern California. These cities’ economies were focused on suburban sprawl and thus were especially hard hit by the housing collapse. But that isn’t the only, or even the biggest, reason for their high levels of youth disconnection.

Share of Youth Not Working and Not in School in the 25 Largest Metro Areas

“…” Means data unavailable because there are too few 16- to 24-year-olds to allow for reliable calculations. Youth disconnection rates have been rounded to one decimal place. In several instances, the values may therefore appear to be tied but the rankings reflect the original values that result from calculation of the rate. Source: Measure of America

There is a close connection between youth disconnection and education levels or human capital, according to the study. Sun Belt metro areas have fewer highly educated adults and have tended historically to attract people with relatively lower levels of education. In contrast, the metro areas with the highest percentage of college-educated adults—places like Boston, Washington, D.C., Denver, and San Francisco—have smaller shares of disconnected youth.

This positive association between low human capital and youth disconnection stems from several mechanisms. Adults with college degrees are better able to contribute to their children’s success. College-educated parents not only provide positive role models, they also earn more money than non-college-educated parents on average. Public schools tend to be better funded in more affluent neighborhoods, and parents can afford to invest in enrichment activities outside of school. Parents with high human capital exert indirect effects on their local economies, too. Because degree holders earn more, they tend to spend more in stores, restaurants, and other businesses and thus support entry-level jobs in the local community.

Youth disconnection varies considerably by race and ethnicity, according to the report. Overall, African American youths are roughly twice as likely to be disconnected than whites, with Latinos somewhere in the middle. Asian Americans are the least disconnected.

Again the pattern varies considerably by metro area. For instance, black youth in Boston are less disconnected (14.2 percent) than white youth in San Bernardino (17.5 percent), Charlotte (16.7 percent), and Portland, Oregon (16 percent). The geographic variation in youth disconnection rates is associated with a range of factors, according to the report, including the levels of unemployment and poverty experienced by adults and the degree to which poorer neighborhoods are isolated from key institutions of mainstream society. Again, human capital or education levels play a key role.

Take Seattle and Boston, for example. Both are hotbeds of innovative industries and magnets for talent. Both have relatively low unemployment rates—Seattle is at 5.8 percent, Boston at 6.6 percent (the national rate is 7.4 percent). Both have relatively modest-sized black populations—Boston’s is 7.4 percent and Seattle’s is 6.8 percent, versus a national average of 13.1 percent. But Seattle’s overall youth disconnect rate is nearly 4 percentage points higher than Boston’s, and its disconnect rate for blacks is 7 points higher.

Though it holds its youth to some of the nation’s toughest education standards, Massachusetts does a better job of keeping its students from dropping out of high school than Washington State does. And according to Measure of America codirectors Sarah Burd-Sharps and Kristen Lewis, greater Boston has one of the nation’s highest rates of school enrollment—81.4 percent—for the population aged three to twenty-four. Seattle’s school enrollment for that group is just 75.5 percent, almost 6 percentage points lower. The gap is even larger if we look at just the African American populations in the two metro areas: 83.4 percent of African American children and young adults are enrolled in school in Boston, compared to 69.2 percent in Seattle.

What can be done? One strategy that offers considerable payback is early childhood education. Creating better entry-level jobs is also important. For that, we need to upgrade low-skill, low-wage service work. The fastest-growing job categories—and the jobs that are the most available to young people, especially those with limited education—are low-pay, low-skill service jobs, in food preparation, retail sales, and the like. Those jobs can be made better—not just by mandating higher minimum wages, but by harnessing the creativity, knowledge, and initiative of workers to boost productivity and hence wages. We also need policies that are directly targeted at youth entering the job market. The more marketable skills young people have and the more practical experience they have accumulated in actual workplaces, the better their chances of finding and keeping work over the long term.

That’s an initiative that would benefit all workers, not just young ones—and their employers as well.

Richard Florida is author of Rise of the Creative Class (recently reissued as Rise of the Creative Class Revisited), winner of the Washington Monthly’s Political Book Award for 2002. He is director of the Martin Prosperity Institute at the University of Toronto’s Rotman School of Management and Global Research Professor at NYU. He is senior editor with the Atlantic and editor at large of Atlantic Cities.

February 25, 2013

The unemployment rate is 7.8%. Both parties agree that this is too high, but they propose totally different solutions to create more jobs. The Republican solution is to give more tax breaks and other advantages to the rich and to corporations because they are the job creators. Really? Then why haven't they created more jobs in the last 30 years. This historical experiment of "trickle down" economics has been tried since the time of Ronald Reagan and it has proven to be an abject failure. Yet Republicans are still pushing it as the solution to all our problems.

Esteemed Nobel laureate and Princeton professor Paul Krugman wants to take the traditional Keynesian approach and do deficit spending to improve the economy. He says there's no reason to worry about the deficit since the US can borrow money at extremely low rates. Not to worry. He sides with Dick Cheney who famously said, "Deficits don't matter." He and Bush then went on to add trillions to the national debt by fighting two unpaid for wars, tax breaks for the rich and an unpaid for prescription drug benefit for seniors that was in reality a giveaway to the pharmaceutical companies. But now that a Democratic President is in office, Republicans are all worried about deficits. They should have been worried when George W Bush was doing the profligate spending.

However, I disagree with both Cheney and Krugman. Deficits do matter and here's why. Sure the government can borrow a lot of money, as much as it wants to, at extremely low rates. But the government has to pay interest on the national debt and that is a growing part of the budget. Interest on the debt is the fourth largest government expenditure after Defense, Medicare and Medicaid. In 2011 Federal, state and local governments spent $454,393,280,417.03 on interest. It actually came down dramatically in 2012 to $359,796,008,919.49. That's still a lot of money. The Federal government alone spent around $220 billion in net interest on its debt in 2012, and is predicted to spend over a trillion dollars in interest by 2020. That's $1 trillion we can't spend to educate our kids or to replace our badly worn-out infrastructure.

And there's no guarantee that interest rates will continue to remain at historical lows. They are being held there right now by the Federal Reserve's policy of quantitative easing. The Fed is printing money at the rate of $85 billion a month. This money is being essentially given to the large Wall Street banks. Theoretically it's being loaned, but if someone loans you money at a zero interest rate, why would you ever pay it back? It's foolish to think that interest rates will always remain this low and that foreign nations and individuals will continue to loan us money ad infinitum.

The Fed's policy of printing money and then giving it to the big banks relies on the theory that low interest rates will get the economy moving again. The theory goes that people will be attracted to the low interest rates, borrow money and consume. It assumes that banks will actually loan out the money. Since consumption is 70% of the US economy, GDP will increase and that will create more jobs. In other words the Fed is exercising the same trickle down theory of economic growth made famous by Ronald Reagan and that has been tried for the last 30 years and failed. The Fed is essentially devaluing American currency in the hopes that this will create jobs. And it has been a big failure insofar as job creation is concerned but it has kept the US government's borrowing rates low.

So if both deficit reduction and job creation are important, how do you do both. Put simply the US government has to walk and chew gum at the same time. The Republican emphasis on cutting spending, especially spending on social programs, would lead to austerity and that would contract the economy even more. So that isn't the solution. To be fair President Obama has not been on the side of deficit spending as a way to get the economy out of the doldrums. He has been for a balanced approach of stimulating the economy and paying down the deficit. But Paul Krugman and many Democratic theorists like Robert Reich have.

The trick is to note that government spending does not have to be deficit spending. Government spending can increase without incurring greater deficits by increasing government revenues. And there are different varieties of government spending. Republicans favor just giving government money to private corporations and having them do the job. Their policy is to let the government just be a money conduit from taxpayers to corporations. Alternatively, government can spend money directly on jobs programs like rebuilding infrastructure. Instead of using the indirect approach which amounts to pushing on a string which is what the Fed is doing and which Republicans advocate, the government can actually create jobs directly in the public sector. If you want to create jobs, why not just create jobs directly instead of trying to get the private sector to create jobs. President Obama should just get up and say, "We've tried various policies to get the private sector to create jobs; they haven't worked so now the government, the public sector, is going to create jobs directly."

But here's where Democrats and President Obama have a problem. Instead of calling for more revenue by taxing the rich and corporations and government direct spending instead of spending to fund private corporations to rebuild infrastructure, Obama is reticent because he is afraid of being labeled a socialist. No worries, he's already been labeled a socialist despite his administration's being the most pro-business administration in years. And beware of the public/private partnership which is just another variation of the privatization of functions which the government can do more efficiently. We don't want to replace the military-industrial complex with an infrastructure-industrial complex replete with lobbyists, cost plus contracts and highly paid CEOs. There's no need for Wall Street to get involved.

Well, where is the money going to come from? Senator Bernie Sanders has an answer: End Offshore Tax Havens. One out of four profitable corporations pays nothing in taxes. Tax rates on profits are the lowest since 1972. Last year Facebook paid nothing despite having a billion dollars in profits. Government revenue as a percentage of GDP is lower than at any time in history. Corporate contributions to tax revenue are the lowest of any major country on earth. It is absurd for major corporations to stash huge amounts of money in countries like the Cayman Islands which have a zero tax rate.

Bernie Sanders and Jan Schakowsky have introduced the Corporate Tax Fairness Act. The bill will raise $590 billion over the next decade. The bill will also stop giving tax breaks to corporations for shipping jobs overseas. Their bill would prevent oil companies from disguising royalty payments to foreign countries as taxes in order to reduce their taxes in the US among other things. And it has a snowball's chance in hell of passing. A financial transaction tax would bring in as much as $100 billion annually. We used to have one; Europe just recently enacted one. Let's end the "carried interest" loophole for hedge and private equity funds. Wall Street needs to start paying its fair share.

Corporations have been getting away with murder in not paying their fair share of taxes. This is from an article by Bernie Sanders:

"In 2010, Bank of America set up more than 200 subsidiaries in the Cayman Islands (which has a corporate tax rate of 0.0 percent) to avoid paying U.S. taxes. It worked. Not only did Bank of America pay nothing in federal income taxes, but it received a rebate from the IRS worth $1.9 billion that year. They are not alone. In 2010, JP Morgan Chase operated 83 subsidiaries incorporated in offshore tax havens to avoid paying some $4.9 billion in U.S. taxes. That same year Goldman Sachs operated 39 subsidiaries in offshore tax havens to avoid an estimated $3.3 billion in U.S. taxes. Citigroup has paid no federal income taxes for the last four years after receiving a total of $2.5 trillion in financial assistance from the Federal Reserve during the financial crisis."

The sad fact is that the private sector is not in the process of creating jobs but of destroying jobs through automation and robotics. Almost anything a human being might have done in a job is now being done by robots. Some say that this creates jobs for "knowledge workers." Sure if you're among the upper 1% in knowledge talent. Companies like Microsoft, Google, Apple and Facebook are not looking for the average college graduate. They're looking for the upper 1% of college graduates. Together they employ less than 200,000 people in the US. The top talent in every field are making good money. Everyone else is going downhill if they're employed at all. 50% of college graduates are either unemployed or underemployed in terms of their qualifications. In the 2009-2010 recovery, 93% of the gains in income went to the top 1%.

Why should the private sector create jobs if they can get a robot to do the work 24 hours a day at a cost of less than $5.00 an hour? If the private sector will not create jobs, that leaves the government to create jobs directly. Instead of pushing on a string with policies that are supposed to create jobs indirectly by encouraging the private sector to do so, government should get more involved. More government revenues plus direct job creation rebuilding infrastructure could result in growing the economy, providing good middle class jobs and paying down the debt.

Chrystia Freeman in her book Plutocracy explains this phenomenon which results in the divergence of jobs and income, creating a well to do upper 1% class and everybody else:

"This is what ecomomists call the "superstar" effect - the tendency of both technological change and globalization to create winner-take-all economic tournaments in many sectors and companies, where being the most successful in your field delivers huge rewards, but coming in second place, and certainly in fifth or tenth, has much less economic value."

We are seeing the effects of a meritocracy where the top 1% of talent merges with the top 1% in terms of income and wealth. This is great for the top 1% of graduates from elite colleges but not so much for the average graduates of average colleges with $100,000. in student loan debt and a job at Starbucks instead of a career type job in their field. In every field the chasm between the superstars and everyone else is getting bigger and bigger. Inequality increases with the acceleration of meritocracy. Meritocracy and plutocracy converge creating a democratic dystopia.

That's why the government has to step in to regulate this runaway dystopia. Taxes on corporations and the rich need to be increased in order to tamp down inequality. This revenue needs to be redistributed to the former middle class in terms of job programs. It could be redistributed in terms of welfare and unemployment insurance, but this creates a class of dependents. It would be much better to create a middle class of workers rebuilding infrastructure. And this is not a trivial job. The American Society of Civil Engineers estimates that there is $2 trillion worth of work that needs to be done just to bring roads, bridges and other basic infrastructure up to par. But there is more to infrastructure than just that. When you consider all that needs to be done to prevent and combat the changes due to global warming, there is enough potential work out there to fully employ US workers for generations. Utilities need to be hardened and undergrounded. Fossil fuel powered electric plants need to be converted to solar and wind. Buildings need to be made less energy consuming. High speed rail needs to be implemented. Housing needs to be moved back from the shorelines.

There is no lack of work that needs to be done, and this is work the private sector not only won't do but in many cases it is work that the private sector is lobbying against doing. They profit from using the atmosphere as a dump. It's crucial that the government prevent runaway wealth maldistribution, create jobs that the private sector has no incentive to create and save the planet from ecological disaster.

August 01, 2012

Prominent economists have been expounding for months on the dire consequences of this country’s unemployment crisis. As recently as this May, Dean Baker and Ken Hassett exhorted us to pay vigilant attention. In an op-ed headlined “The Human Disaster,” they described unemployment as “nothing short of a national emergency.”

Still, the election discussion plods on with barely a nod to the criminal unemployment disaster.

For bracing relief, check out the latest from economist Robert Pollin, professor at the University of Massachusetts, Amherst. Pollin’s latest book, Back To Full Employment, lays out a roadmap to recovery that wouldn’t take a miracle. It wouldn’t even require a Democratic sweep this November; merely action by the Fed and a progressive movement worth its salt.

When world leader companies like Caterpillar Inc. are putting the squeeze on their workers despite accruing record-setting profits; when banks are hoarding $1.6 trillion, money is cheap and government borrowing costs are at their lowest in history, there’s simply no excusing existing levels of poverty, and the poverty-level wages currently prevailing in the not-so-United States.

There’s no excuse for 6 million people to be living on food stamps alone or for 103 million to be not getting by on wages that barely lift them above poverty (see Peter Edelman on this, if you don’t believe it). There’s no excuse, and there’s no point simply beating up on trade unions.

The world’s best president could roll back every last anti-organizing law and set organizers free to sign up every last employed American, and still the standing pool of desperate unemployed would drain worker power away. To expect otherwise is to wait for Batman.

Economists know how to maintain decently full employment. Coming out of the Great Depression, says Pollin, we had some basic tools. “To run an economy at a level of fundamental decency, you try to achieve full employment.” Neoliberalism, under Thatcher and Reagan, he says, “tossed it all away.”

The last time the US saw relatively full employment wasn’t in ancient history. It was at the end of the 1990s. We can do it. Pollin lays out how. What we need is a progressive movement with full employment at the spear-tip of its agenda.

Alexander Cockburn and Pollin discussed full employment in the Nation in 1987. It’s chilling how little has changed. You can read that article here [pdf]. A full transcript of my conversation with Pollin will appear in the next print edition of CounterPunch.

July 07, 2012

Bad news for the U.S. economy and for Barack Obama. We’re in the jobs doldrums. Unemployment for June is stuck at 8.2 percent, the same as in May. And only 80,000 new jobs were added.

Remember, 125,000 news jobs are needed just to keep up with the increase in the population of Americans who need jobs. That means the jobs situation continues to worsen.

The average of 75,000 new jobs created in April, May and June contrasts sharply with the 226,000 new jobs created in January, February and March.

In Ohio yesterday, Obama reiterated that he had inherited the worst economy since the Great Depression. That’s true. But the excuse is wearing thin. It’s his economy now, and most voters don’t care what he inherited.

In fact, a good case can be made that the economy is out of Obama’s hands — that the European debt crisis and the slowdown in China will have far more impact on the U.S. economy over the next four months than anything Obama could come up with, even if he had the votes.

It’s also out of the Fed’s hands. No matter how low the Fed keeps interest rates, it doesn’t matter between now and Election Day. Companies won’t borrow to expand if they don’t see enough consumers out there demanding their products. Consumers won’t spend if they’re worried about their jobs and paychecks. And consumers won’t borrow (or be able to borrow) if they don’t have the means.

Yet Obama must show he understands the depth and breadth of this crisis, and is prepared to do large and bold things to turn the economy around in his second term if and when he does have the votes in Congress. So far, his proposals are policy miniatures relative to the size of the problem.

The real political test comes after Labor Day. Before Labor Day, Americans aren’t really focused on the upcoming election. After Labor Day, they focus like a laser. If the economy is moving in the right direction then — if unemployment is dropping and jobs are increasing — Obama has a good chance of being reelected. If the jobs doldrums continue — or worse — he won’t be.

June 02, 2012

The White House must be telling itself there are still five months between now and Election Day, so the jobs picture could brighten. After all, we went through a similar mid-year slump in 2011 but came out fine.

But however you look at today’s jobs report, it’s a stunning reminder of how anemic the recovery has been – and how perilously close the nation is to falling into another recession.

Not only has the unemployment rate risen for the first time in almost a year, to 8.2 percent, but, more ominously, May’s payroll survey showed that employers created only 69,000 net new jobs. The Labor Department’s Bureau of Labor Statistics also revised its March and April reports downward. Only 96,000 new jobs have been created, on average, over the last three months.

Put this into perspective. Between December and February, the economy added an average of 252,000 jobs each month. To go from 252,000 to 96,000, on average, is a terrible slide. At least 125,000 jobs are needed a month merely to keep up with the growth in the working-age population available to work.

Face it: The jobs recovery has stalled.

What’s going on? Part of the problem is the rest of the world. Europe is in the throes of a debt crisis and spiraling toward recession. China and India are slowing. Developing nations such as Brazil, dependent on exports to China, are feeling the effects and they’re slowing as well. All this takes a toll on U.S. exports.

But a bigger part of the problem is right here in the United States, and it’s clearly on the demand side of the equation. Big companies are still sitting on a huge pile of cash. They won’t invest it in new jobs because American consumers aren’t buying enough to justify the risk and expense of doing so.

Yet American consumers don’t have the cash or the willingness to spend more. Not only are they worried about keeping their jobs, but their wages keep dropping. The median wage continues to slide, adjusted for inflation. Average hourly earnings in May were up 2 cents – an increase of 1.7 percent from this time last year – but that’s less than the rate of inflation. And the value of their home – their biggest asset by far – is still declining. The average workweek slipped to 34.4 hours in May.

Corporate profits are healthy largely because companies have found ways to keep payrolls down – substituting lower-paid contract workers, outsourcing abroad, using computers and new software applications. But that’s exactly the problem. In paring their payrolls, they’re paring their customers.

And we no longer have any means of making up for the shortfall in consumer demand. Federal stimulus spending is over. In fact, state and local governments continue to lay off large numbers. The government cut 13,000 jobs in May. Instead of a boost, government cuts have become a considerable drag on the rest of the economy.

Republicans will have a field day with today’s jobs report, taking it as a sign that Obama’s economic policies have failed and we need instead their brand of fiscal austerity combined with more tax cuts for the wealthy.

April 27, 2012

Britain’s Office for National Statistics confirmed today (Wednesday) that in the first quarter of this year Britain’s economy shrank .2 percent, after having contracted .3 percent in the fourth quarter of 2011. (Officially, two quarters of shrinkage make a recession). On Monday Spain officially fell into recession, for the second time in three years. Portugal, Italy, and Greece are already basket cases. It seems highly likely France and Germany are also contracting.

Why should we care? Because a recession in the world’s third-largest economy, combined with the current slowdown in the world’s second-largest (China), spells trouble for the world’s largest.

Remember – it’s a global economy. Money moves across borders at the speed of an electronic impulse. Wall Street banks are enmeshed into a global capital network extending from Frankfurt to Beijing. That means that notwithstanding their efforts to dress up balance sheets, the biggest U.S. banks are more fragile than they’ve been at any time since 2007.

Meanwhile, goods and services slosh across the globe. If there’s not enough demand for them coming from the second and third-largest economies in the world, demand in the U.S. can’t possibly make up the difference. That could mean higher unemployment here as well as elsewhere.

What’s the problem with Europe? Don’t blame it on the so-called “debt crisis.” There was no debt crisis in Britain, for example, which is now experiencing its first double-dip recession since the 1970s.

Blame it on austerity economics – the bizarre view that economic slowdowns are the products of excessive debt, so government should cut spending. Germany’s insistence on cutting public budgets has led Europe into a recession swamp.

German Chancellor Angela Merkel, who has led the austerity charge, and other European policy makers who have followed her, have forgotten two critical lessons.

First, that the real issue isn’t debt per se but the ratio of the debt to the size of the economy.

In their haste to cut the public debt, Europeans have overlooked the denominator of the equation. By reducing public budgets they’ve removed a critical source of demand — at a time when consumers and the private sector are still in the gravitational pull of the Great Recession and can’t make up the difference. The obvious result is a massive slowdown that has worsened the ratio of Europe’s debt to its total GDP, and is plunging the continent into recession.

A large debt with faster growth is preferable to a smaller debt sitting atop no growth at all. And it’s infinitely better than a smaller debt on top of a contracting economy.

The second lesson Merkel and others have overlooked is that the social costs of austerity economics can be huge. It’s one thing to cut a government budget when unemployment is low and wages are rising. But if you cut spending during a time of high unemployment and stagnant or declining wages, you’re not only causing unemployment to rise even further. You’re also removing the public services and safety nets people depend on, especially when times are tough.

And with high social costs comes political upheaval. On Monday, Netherlands Prime Minister Mark Rutte was forced to resign. U.K. Prime Minister David Cameron is on the ropes. The upcoming election in France is now a tossup – incumbent Nicolas Sarkozy might well be unseated by Francois Hollande, a Socialist. European fringe parties on the left and the right are gaining ground. Across Europe, record numbers of young people are unemployed – including many recent college graduates – and their anger and frustration is adding to the upheaval.

Social and political instability is itself a drag on growth, generating even more uncertainty about the future.

What European policy makers should do is set a target for growth and unemployment — and continue to increase government spending until those targets are met. Only then should they adopt austerity.

What are the chances that Merkel et al will see the light before Europe plunges into an even deeper recession? Approximately zero.

The danger here for the United States is clear, but there’s also a clear lesson. Republicans have become the U.S. party of Angela Merkel, demanding and getting spending cuts at the worst possible time – and ignoring the economic and social consequences.

Even if the U.S. economy (as well as President Obama’s reelection campaign) survives the global slowdown, we’re heading for a big dose of austerity economics next January – when drastic spending cuts are scheduled to kick in, as well as tax increases on the middle class. But the U.S. economy isn’t nearly healthy enough to bear this burden.

If nothing is done to reverse course in the interim, we’ll be following Europe into a double dip.

January 13, 2012

The harm today’s youth unemployment is doing will be felt for decades, both by those affected and by society at large

MARIA GIL ULLDEMOLINS is a smart, confident young woman. She has one degree from Britain and is about to conclude another in her native Spain. And she feels that she has no future.

Ms Ulldemolins belongs to a generation of young Spaniards who feel that the implicit contract they accepted with their country—work hard, and you can have a better life than your parents—has been broken. Before the financial crisis Spanish unemployment, a perennial problem, was pushed down by credit-fuelled growth and a prolonged construction boom: in 2007 it was just 8%. Today it is 21.2%, and among the young a staggering 46.2%. “I trained for a world that doesn’t exist,” says Ms Ulldemolins.

Spain’s figures are particularly horrendous. But youth unemployment is rising perniciously across much of the developed world. It can seem like something of a side show; the young often have parents to fall back on; they can stay in education longer; they are not on the scrapheap for life. They have no families to support nor dire need of the medical insurance older workers may lose when they lose their jobs. But there is a wealth of evidence to suggest that youth unemployment does lasting damage.

In the past five years youth unemployment has risen in most countries in the OECD, a rich-country club (see chart 1). One in five under-25s in the European Union labour force is unemployed, with the figures particularly dire in the south. In America just over 18% of under-25s are jobless; young blacks, who make up 15% of the cohort, suffer a rate of 31%, rising to 44% among those without a high-school diploma (the figure for whites is 24%). Other countries, such as Switzerland, the Netherlands and Mexico, have youth unemployment rates below 10%: but they are rising.

The costs mount up

In tough times young people are often the first to lose out. They are relatively inexperienced and low-skilled, and in many countries they are easier to fire than their elders. This all goes to make them obvious targets for employers seeking savings, though their low pay can redress things a little. In much of the OECD youth-unemployment rates are about twice those for the population as a whole. Britain, Italy, Norway and New Zealand all exceed ratios of three to one; in Sweden the unemployment rate among 15- to 24-year-olds is 4.1 times higher than that of workers aged between 25 and 54.

Not only is the number of underemployed 15- to 24-year-olds in the OECD higher than at any time since the organisation began collecting data in 1976. The number of young people in the rich world who have given up looking for work is at a record high too. Poor growth, widespread austerity programmes and the winding up of job-creating stimulus measures threaten further unemployment overall. The young jobless often get a particular bounce in recoveries: first out, they are often also first back in. But the lack of a sharp upturn means such partial recompense has not been forthcoming this time round. In America the jobs recovery since 2007 has been nearly twice as slow as in the recession of the early 1980s, the next-worst in recent decades—and from a worse starting-point. In some countries a rigging of the labour market in favour of incumbents and against the young makes what new jobs there are inaccessible.

Youth unemployment has direct costs in much the same way all unemployment does: increased benefit payments; lost income-tax revenues; wasted capacity. In Britain a report by the London School of Economics (LSE), the Royal Bank of Scotland and the Prince’s Trust puts the cost of the country’s 744,000 unemployed youngsters at £155m ($247m) a week in benefits and lost productivity.

Some indirect costs of unemployment, though, seem to be amplified when the jobless are young. One is emigration: ambitious young people facing bleak prospects at home often seek opportunities elsewhere more readily than older people with dependent families. In Portugal, where the youth unemployment rate stands at 27%, some 40% of 18- to 30-year-olds say they would consider emigrating for employment reasons. In some countries, such as Italy, a constant brain-drain is one more depressing symptom of a stagnant economy. In Ireland, where discouragement among young workers has shot up since 2005 (see chart 2), migration doubled over the same period, with most of the departed between 20 and 35. This return of a problem the “Celtic tiger” once thought it had left behind is treated as a national tragedy.

It’s personal

Another cost is crime. Attempts to blame England’s recent riots on youth unemployment were overhasty. But to say there is no link to crime more generally looks unduly optimistic. Young men are already more likely to break the law than most; having more free time, more motive and less to lose hardly discourages them. Some researchers claim to have identified a causal link between increased youth unemployment and increases in crime, specifically property crime (robbery, burglary, car theft and damage) and drug offences. No such link is seen for overall unemployment. If the crime leads to prison, future employment prospects fall off a cliff.

And then there are the effects on individuals. Young people are hit particularly hard by the economic and emotional effects of unemployment, says Jonathan Wadsworth, a labour economist at the LSE. The best predictor of future unemployment, research shows, is previous unemployment. In Britain a young person who spends just three months out of work before the age of 23 will on average spend an additional 1.3 months in unemployment between the ages of 28 and 33 compared with someone without the spell of youth joblessness. A second stint of joblessness makes things worse.

Research from the United States and Britain has found that youth unemployment leaves a “wage scar” that can persist into middle age. The longer the period of unemployment, the bigger the effect. Take two men with the same education, literacy and numeracy scores, places of residence, parents’ education and IQ. If one of them spends a year unemployed before the age of 23, ten years later he can expect to earn 23% less than the other. For women the gap is 16%. The penalty persists, though it shrinks; at 42 it is 12% for women and 15% for men. So far, the current crisis has not led to these long-term periods of youth unemployment rising very much; almost 80% of young people in the OECD who become unemployed are back in work within a year. But that could well change.

The scarring effects are not necessarily restricted to the people who are actually unemployed. An American study shows that young people graduating from college and entering the labour market during the deep recessions of the early 1980s suffered long-term wage scarring. Graduates in unlucky cohorts suffer a wage decline of 6-7% for each percentage-point increase in the overall unemployment rate. The effect diminishes over time, but is still statistically significant 15 years later.

After a period of unemployment, the temptation to take any work at all can be strong. Wage scarring is one of the reasons to think this has lasting effects, and policies designed to minimise youth unemployment may sometimes exacerbate them. Spain, which has developed a scheme for rolling over temporary contracts to provide at least some chances of employment to the young, should pay heed to the experience of Japan in the early 2000s. Young people unemployed for a long time were channelled into “non-regular” jobs where pay was low and opportunities for training and career progression few. Employers seeking new recruits for quality jobs generally preferred fresh graduates (of school or university) over the unemployed or underemployed, leaving a cohort of people with declining long-term job and wage prospects: “youth left behind”, in the words of a recent OECD report. Japan’s “lost decade” workers make up a disproportionate share of depression and stress cases reported by employers.

Unemployment of all sorts is linked with a level of unhappiness that cannot simply be explained by low income. It is also linked to lower life expectancy, higher chances of a heart attack in later life, and suicide. A study of Pennsylvania workers who lost jobs in the 1970s and 1980s found that the effect of unemployment on life expectancy is greater for young workers than for old. Workers who joined the American labour force during the Great Depression suffered from a persistent lack of confidence and ambition for decades.

There are other social effects, too, such as “full-nest syndrome”. In 2008, 46% of 18- to 34-year-olds in the European Union lived with at least one parent; in most countries the stay-at-homes were more likely to be unemployed than those who had moved out. The effect is particularly notable in the countries of southern Europe, where unemployment is high and declining fertility means small families: a recent study by CGIL, an Italian trade-union federation, found that more than 7m Italians aged between 18 and 35 were still living with their parents. Since 2001 one in four British men in their 20s, and one in six women, have “boomeranged” home for a period. This sort of change will, for good or ill, ripple on down the generations which may, if young people live longer and longer at home, become more spread out.

In lieu of jobs

In some countries, particularly in southern Europe, the main focus for governments should be on opening up labour markets that lock out younger workers (see article). In countries with more flexible labour markets, the emphasis tends to be on “skilling up” young people. This is not a panacea.

Universities can be a source of skills and a place to sit out the doldrums, so students are entering and staying on at university more and more. American graduate schools have received at least 20% more applications since 2008. But as they build up debts, not all these students will be improving their job prospects. Having a university degree still increases the chances of employment, but joblessness among college graduates in America is the highest it has been since 1970.

There are dangers in vocational training, too. The Wolf report, a review of vocational education in Britain published this year, pointed out that the wrong kind of training can actually damage employment prospects. It found that almost a third of 16- to 19-year-olds in Britain are enrolled in low-level vocational courses that have little or no labour-market value. Research indicates that taking a year or two to complete schemes of this sort reduces lifetime earnings unless the schemes are combined with employer-based apprenticeships.

In Germany, seen by many as a model in this regard, a quarter of employers provide formal apprenticeship schemes and nearly two-thirds of schoolchildren undertake apprenticeships. Students in vocational schools spend around three days a week as part-time salaried apprentices of companies for two to four years. The cost is shared by the company and the government, and it is common for apprenticeships to turn into jobs at the end of the training. The youth-unemployment rate in Germany, at 9.5%, is one of the lowest in the EU. Apprentice-style approaches practised in the Netherlands and Austria have had similar results.

Germany’s export-driven economy, with its army of specialised manufacturers, may be particularly suited to the apprenticeship model. It is not obvious how easily it could be imported into more service-oriented economies. America, for example, lacks the institutions—strong unions, compliant management and a hands-on government—that have made the German model so successful. Such programmes would also have to overcome cultural obstacles. Bill Clinton’s school-to-work initiative, a nod to the apprenticeship system, was derided as second-rate education. Even in the skilled trades where apprenticeships have caught on, the model has suffered because of the collapse of the construction industry. Britain, though, seems willing to give it a whirl. Last year 257,000 positions were created.

Yet this may be of little use to the hardest-to-reach under-25s, who often come from backgrounds where worklessness is the norm and the lack of adult role models creates aspiration gaps at an early age. “Targeted programmes with one-on-one attention are what these young people need,” believes Paul Brown, a director of the Prince’s Trust. “Policies aimed at all young people will only make the neediest fall through the cracks.”

January 10, 2012

Two years ago the unemployment rate was 9.9 percent. Now it’s 8.5 percent. At first blush that’s good news for the President. Actually it may not be.

Voters pay more attention to the direction the economy is moving than to how bad or good it is. So if the positive trend continues in the months leading up to Election Day, Obama’s prospects of being reelected improve.

But if you consider the number of working-age Americans who have stopped looking for work over the past two years because they couldn’t find a job, and young people too discouraged even to start looking, you might worry.

The Bureau of Labor Statistics, which measures the unemployment rate every month, counts people as unemployed only if they’re looking for work. If they’re too discouraged even to enter the job market, they’re not counted.

If all the potential workers who have dropped out of the job market over the past two years were counted, today’s unemployment rate wouldn’t be 8.5 percent. It would be 9.5 percent. That’s only a bit down from the 9.9 percent unemployment rate two years ago.

The genuinely good news, though, is the Bureau of Labor Statistics also tells us 200,000 new jobs were added in December. Granted, this doesn’t put much of a dent in the 10 million jobs we’ve either lost since the recession began or needed to keep up with the growth of the working-age population (at this rate we won’t return to our pre-recession level of employment until 2019) but, hey, it’s at least the right direction.

But here’s the political irony. This little bit of good news is likely to raise the hopes of the great army of the discouraged – many of whom will now start looking for work.

And what happens when they start looking? If they don’t find a job (and, let’s face it, the chances are still slim) they’ll be counted as unemployed.

Which means the unemployment rate will very likely edge upward in coming months. This will be bad for the President because it will look as though the trend is in the wrong direction again.

December 02, 2011

In brief: The Bureau of Labor Statistics’ household survey shows unemployment at 8.6 percent, and the payroll survey shows 120,000 new jobs in November (140,000 from the private sector, and a loss of 20,000 in the public sector). BLS also revised upward its job numbers for September and October.

What does it mean? We’re not out of the woods but we might be seeing some daylight.

Maybe. Here’s what you need to worry about:

First, this rate of job growth is barely enough to keep up with the growth in the working-age population. So we’re not making progress on the backlog of more than 13 million jobless Americans, and another 11 million working part-time who’d rather have full-time jobs.

Second, retail jobs constituted a third of new private-sector employment in November. Retail jobs tend to be unstable, temporary, and low-paying. Although the BLS is supposed to adjust for seasonal employment (i.e. Christmas), it doesn’t take account of the fact that more and more Americans have been pushing up their Christmas buying to before Thanksgiving. So some of these jobs may not be around very long.

Third, the jobless rate fell partly because around 315,000 people who had been looking for jobs dropped out of the job market in November. Remember: If you’re not actively looking, you’re not counted as unemployed on the household survey.

Fourth, hourly earnings are down, as are real wages. So to some extent Americans have been substituting lower wages for lost jobs – either by accepting lower wages at their current place of employment, or getting the boot and settling for lower wages elsewhere. A job is better than no job, of course, but a job with a lower wage isn’t nearly as good as a job with at the same or better wage.

Fifth, another reason for November’s job growth is that American consumers – whose spending accounts for about 70 percent of the economy – increased their spending. But this can’t continue because, as noted, wages are dropping. They spent more by cutting into their meager savings. Don’t expect this to last.

Finally, there’s the wild card of the rest of the global economy – the European debt crisis and the high likelihood of recession in Europe, the slowdown in China and India, slower growth in developing nations. Some of our jobs depend on exports, which will drop. Others are keyed to the financial sector, which is being hit directly.

Two final wild cards closer to home: The Fed, and Congress. The Fed meets in two weeks to decide on further monetary easing. With today’s report, the odds of easing are down, unfortunately. Believe it or not, several Fed members are worried about inflation.

And if Congress refuses to extend the payroll tax cut and/or unemployment benefits by December 30, it will create another drag on the economy. When people ask me what Congress is likely to do I always say the same thing: The odds are in favor of nothing.

So while today’s jobs report is in the right direction, it’s way too early to break out the champagne.

November 27, 2011

Most political analysis of America’s awful economy focuses on whether it will doom President Obama’s reelection or cause Congress to turn toward one party or the other. These are important questions, but we should really be looking at the deeper problems with which whoever wins in 2012 will have to deal.

Not to depress you, but our economic troubles are likely to continue for many years — a decade or more. At the current rate of job growth (averaging 90,000 new jobs per month over the last six months), 14 million Americans will remain permanently unemployed. The consensus estimate is that at least 90,000 new jobs are needed just to keep up with the growth of the labor force. Even if we get back to a normal rate of 200,000 new jobs per month, unemployment will stay high for at least ten years. Years of high unemployment will likely result in a vicious cycle, as relatively lower spending by the middle-class further slows job growth.

This, in turn, could make political compromise even more elusive than it is now, as remarkable as that may seem. In past years, politics has been greased by the expectation of better times to come – not only more personal consumption but also upward mobility through good schools, access to college, better jobs, improved infrastructure. It’s been a virtuous cycle: When the economy grows, the wealthy more easily accept a smaller share of the gains because they still came out ahead of where they were before. And everyone more willingly pays taxes to finance public provision because they share in the overall economic gains.

Now the grease is gone. Fully two-thirds of Americans recently polled by the Wall Street Journal say they aren’t confident life for their children’s generation will be better than it’s been for them. The last time our hopes for a better life were dashed so profoundly was during the Great Depression.

But here’s what might be considered the good news. Rather than ushering in an era of political paralysis, the Great Depression of the 1930s changed American politics altogether — realigning the major parties, creating new coalitions, and yielding new solutions. Prolonged economic distress of a decade or more could have the same effect this time around.

What might the new politics look like? The nation is polarizing in three distinct ways, and any or all of could generate new political alignments.

Anti-establishment

A vast gulf separates Tea Party Republicans from the inchoate Wall Street Occupiers. The former disdain government; the latter hate Wall Street and big corporations. The Tea Party is well organized and generously financed; Occupiers are relentlessly disorganized and underfunded. And if the events of the last two weeks are any guide, Occupiers probably won’t be able to literally occupy public areas indefinitely; they’ll have to move from occupying locations to organizing around issues.

But the two overlap in an important way that provides a clue to the first characteristic of the new politics. Both movements are doggedly anti-establishment — distrusting politically powerful and privileged elites and the institutions those elites inhabit.

There’s little difference, after all, between the right’s depiction of a “chablis-drinking, Brie-eating” establishment and the left’s perception of a rich one percent who fly to the Hamptons in private jets.

In political terms, both sides are deeply suspicious of the Federal Reserve and want it to be more transparent and accountable. Both are committed to ending “corporate welfare” — special tax breaks and subsidies for specific industries or companies. And for both, Washington’s original sin was the bailing out of Wall Street.

Mere mention the bailout at any Tea Party meet-in or Occupier teach-in elicits similar jeers. The first expression of Tea Party power was the Utah Tea Party’s rejection of conservative Republican senator Robert Bennett because of his vote for the bailout. At the Republican state convention, which ultimately led to the election of Senator Mike Lee, the crowd repeatedly shouted “TARP! TARP! TARP!” The Occupiers, too, began on Wall Street.

The historian Richard Hofstadter once wrote a famous essay about the recurring strain of, as he put it, a “paranoid style in American politics” — an underlying readiness among average voters to see conspiracies among powerful elites supposedly plotting against them. He noted that the paranoia arises during periods of economic stress.

But the web of interconnections linking Washington and Wall Street over the last decade or so — involving campaign contributions, revolving doors, and secret deals — has been so tight as to suggest that this newer anti-establishment activism is based on at least a kernel of truth.

Isolationist

Economic stresses caused Americans to turn inward during the Great Depression, and we’re seeing the same drift this time around. Republican fulminations against the “cult of multiculturalism” are meeting similar sentiments in traditional Democratic precincts — especially when it comes to undocumented immigrants. Alabama and Arizona have spearheaded especially vicious laws, yet polls show increasing percentages of voters across America objecting to giving the children of illegal immigrants access to state-supported services.

Meanwhile, Americans are turning against global trade. Notwithstanding new trade agreements with South Korea, Panama, and Colombia, only a minority of Americans now believes trade agreements benefit the U.S. economy. A growing percentage also want the U.S. out of the World Trade Organization. China has emerged as a special bogeyman. The Democratic-controlled Senate recently passing a bill to punish China for under-valuing its currency, but China-bashing is becoming bipartisan. Mitt Romney accuses former U.S. leaders of having “been played like a fiddle by the Chinese.”

Neither immigration, nor trade, nor China’s currency manipulation is the cause of America’s high unemployment. All three predated the crash of 2008, before which unemployment was only 5 percent. Yet the current drift toward isolationism is not entirely irrational. As hundreds of millions of workers in emerging economies — especially in Asia — continue to enter the global workforce with steadily-improving skills and higher productivity, more and more Americans are losing ground. Meanwhile, immigration and trade are boons to top executives and professionals who gain access to cheaper labor and larger markets for their own skills and insights.

Generational

A third division likely to widen if the economy remains bad runs along a demographic fault-line. Many aging boomers whose nest eggs have turned the size of humming-bird eggs are understandably anxious about their retirement, while America’s young — whose skins are more likely than those of boomer retirees to be brown or black — face years of joblessness.

The jobless rate among people under 25 is already over 17 percent. For young people of color it’s above 20 percent. For young college grads — who assumed a bachelors’ degree was a ticket to upward mobility — unemployment has reached 10 percent. Yet these percentages are likely to rise if boomers decide they can’t afford to retire, and thereby block the jobs pipeline for younger people seeking employment.

Old and young will also find themselves increasingly at odds over public spending. In many communities retirees already resist property tax hikes to pay for local schools. Expect that resistance to grow as boomers have to live on fixed incomes smaller than they expected, and a new wave of young people swarm into the nation’s educational systems. The federal budget will also be a scene of generational conflict. Medicare and Social Security, the two giant entitlement programs for seniors that cost more than $1 trillion a year and account for about a third of the federal budget, will be traded off against programs that benefit the young: Title I funding for low-income school-age students; Head Start; food stamps; child nutrition; children’s health; and vaccines. It’s likely that Medicaid — Medicare’s poor stepchild, half of whose recipients are children — will also be on the cutting board.

After the enactment of Medicare in 1965, poverty among the elderly declined markedly. But poverty among America’s children continues to rise. Yet children don’t have nearly as effective a lobbying presence in Washington. AARP spent $9.7 million on lobbying during first six months of this year, according to the Center for Responsive Politics. By contrast, the Children’s Defense Fund spent just $48,245 last year. Yet because the future lies with the young and with an increasingly diverse America, politicians and parties looking toward the longer term will have to take heed.

Solutions?

How our political parties and leaders will cope with these three fault lines is far from clear, partly because the lines don’t all move in same direction. Young Americans tend to be more anti-establishment than older Americans, for example, but are also more open to other nations and cultures. By the same token, a generational war over the budget might be avoided if anti-establishment movements succeed in reducing corporate welfare, raising taxes on the rich, and limiting Wall Street’s rapacious hold over economic decision making.

What seems certain, however, is that continued high unemployment coupled with slow or no growth will create a new political landscape. This will pose a special challenge — and opportunity. If our political leaders don’t manage the new dividing lines effectively they could invite a politics of resentment that scapegoats certain groups while avoiding the hard work of setting priorities and making difficult choices.

On the other hand, if political leaders take advantage of the energies and possibilities this new landscape offers, they could usher in an era in which the fruits of growth are more widely shared: between elites and everyone else; between the beneficiaries of globalization and those most burdened by it; and between older Americans and young. This itself could reignite a virtuous cycle — a broad-based prosperity that not only generates more demand for goods and services and therefore more jobs, but also a more inclusive and generous politics.

There is a precedent for the second alternative. The structural reforms begun in the depression decade of the 1930s generated just this kind of virtuous cycle in the three decades after World War II. And in devising and implementing these reforms, the Democratic Party came to represent Americans with little power relative to the financial and business elites that had dominated the country before the great crash of 1929. That political realignment was the most profound and successful of the twentieth century.

Will it happen again? At this point, both parties are doing remarkably little given the gravity of the continuing jobs depression and the widening gap of income and wealth. Taming the budget deficit is the only significant issue anyone in Washington seems willing to raise yet Congress seems incapable of achieving any significant progress on this. And the budget itself is only indirectly related to the deeper questions of how to restart economic growth, how much of that growth should be allocated to public goods such as the environment or education, and how the benefits of that growth are to be shared.

Political elites are worried about thunder on the right and the left, but they show scant understanding of what these growing anti-establishment forces signify. Meanwhile, the nation drifts.

November 12, 2011

On planet Washington, where reducing the federal budget deficit continues to be more important than creating jobs, everyone is talking about “triggers” that automatically go into effect if certain other things don’t happen.

Yet no one is talking about the most obvious trigger of all — no budget cuts until the official level of unemployment falls to 5 percent, its level before the Great Recession.

The biggest trigger on the minds of Washington insiders is $1.2 trillion across-the-board cuts that will automatically occur if Congress’s supercommittee doesn’t come up with at least $1.2 trillion of cuts on its own that Congress agrees to by December 23.

That automatic trigger seems likelier by the day because at this point the odds of an agreement are roughly zero.

Here’s the truly insane thing: The triggered cuts start in 2013, a little over a year from now.

Yet no one in their right mind believes unemployment will be lower than 8 percent by then.

The cuts will come on top of the expiration of extended unemployment benefits, the end of a payroll tax cut, and continuing reductions in state and local budgets — all when American consumers (whose spending is 70 percent of the economy) will still be reeling from declining jobs and wages and plunging home prices. Even if Europe’s debt crisis doesn’t by then threaten a global financial meltdown, this rush toward austerity couldn’t come at a worse time.

In other words, what will really be triggered is a deeper recession and higher unemployment.

Democrats on the supercommittee are acting as if they haven’t met an unemployed person. They’re proposing $2.3 trillion in deficit reductions — half from spending cuts (including $350 billion from Medicare), half from tax increases. To make the tax increases palatable to Republicans, Democrats want to give Congress a chance to find the new revenues by overhauling the tax code. If that effort fails, automatic tax increases would be triggered. The top tax rate won’t rise (another bow to Republicans) but top earners’ itemized deductions will be limited.

Oh, and by the way, under the Democrats’ proposal, spending cuts and tax increases, triggered or not, would start in 2013.

The President (remember him?) is still hawking his $450 billion jobs bill, but he’s having a hard time being heard above the deficit-reduction din — in large part because he himself is simultaneously calling for deficit reduction, and most people outside Washington can’t make sense of how we do both.

The public is confused because they don’t get it’s a matter of sequencing. We need to do more spending now in order to bring back jobs and growth, then do less spending in the future — after the economy is once again generating jobs and growth.

That’s why it make more sense for Democrats to propose a deficit reduction plan that goes into effect only when jobs are back. The trigger should be the rate of unemployment — and a 5 percent rate would signal we’re back on track.

True, the unemployment rate is an imperfect measure of how bad things are (it doesn’t include everyone who’s working part-time but needs a full-time job, and those too discouraged to look for work), but at least it’s a useful way of comparing how much worse or better we are than we’ve been. And it can’t be fiddled with (the Bureau of Labor Statistics guards the calculation like gold in Fort Knox).

Deficit hawks in both parties fear if we put off the spending cuts we’ll never do them. But if we cut now, the ratio of deficit to the total economy just gets worse — because the economy stagnates and the swelling ranks of unemployed don’t pay taxes.

So the best of all worlds is to have a big jobs plan now, and also commit to automatic cuts triggered when unemployment falls to 5 percent.

The hawks should find this acceptable. Reasonable Republicans (if any are left) will, too. Democrats, if they still care about jobs, should lead the way.

August 28, 2011

Labor Day is traditionally a time for picnics and parades. But this year is no picnic for American workers, and a protest march would be more appropriate than a parade.

Not only are 25 million unemployed or underemployed, but American companies continue to cut wages and benefits. The median wage is still dropping, adjusted for inflation. High unemployment has given employers extra bargaining leverage to wring out wage concessions.

All told, it’s been the worst decade for American workers in a century. According to Commerce Department data, private-sector wage gains over the last decade have even lagged behind wage gains during the decade of the Great Depression (4 percent over the last ten years, adjusted for inflation, versus 5 percent from 1929 to 1939).

Big American corporations are making more money, and creating more jobs, outside the United States than in it. If corporations are people, as the Supreme Court’s twisted logic now insists, most of the big ones headquartered here are rapidly losing their American identity.

CEO pay, meanwhile, has soared. The median value of salaries, bonuses and long-term incentive awards for CEOs at 350 big American companies surged 11 percent last year to $9.3 million (according to a study of proxy statements conducted for The Wall Street Journal by the management consultancy Hay Group.). Bonuses have surged 19.7 percent.

This doesn’t even include all those stock options rewarded to CEOs at rock-bottom prices in 2008 and 2009. Stock prices have ballooned since then, the current downdraft notwithstanding. In March, 2009, for example, Ford CEO Alan Mulally received a grant of options and restricted shares worth an estimated $16 million at the time. But Ford is now showing large profits – in part because the UAW agreed to allow Ford to give its new hires roughly half the wages of older Ford workers – and its share prices have responded. Mulally’s 2009 grant is now worth over $200 million.

The ratio of corporate profits to wages is now higher than at any time since just before the Great Depression.

Meanwhile, the American economy has all but stopped growing – in large part because consumers (whose spending is 70 percent of GDP) are also workers whose jobs and wages are under assault.

Perhaps there would still be something to celebrate on Labor Day if government was coming to the rescue. But Washington is paralyzed, the President seems unwilling or unable to take on labor-bashing Republicans, and several Republican governors are mounting direct assaults on organized labor (see Indiana, Ohio, Maine, and Wisconsin, for example).

So let’s bag the picnics and parades this Labor Day. American workers should march in protest. They’re getting the worst deal they’ve had since before Labor Day was invented – and the economy is suffering as a result.

August 25, 2011

A state crackdown on jobless benefits is just a warm-up for the big battle to come in Washington this fall

Unless Congress takes action, as many as 3 million Americans could lose their unemployment benefits shortly after the end of 2011, when federal unemployment benefit extensions expire. For many Republican legislators, at both the state and federal level, that day can't come a moment too soon. Who can forget Arizona Sen. Jon Kyl's famous declaration last March that "if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work"?

If anything! Never mind the hardship that the 6.8 million people thrown out of work by the great recession are suffering. Never mind the powerful stimulative effects that result from the speedy injection of unemployment benefit payouts right back into the overall economy. Never mind the gross immorality of ensuring that the rich pay as little taxes as possible while the poor are left without a safety net. The emerging conservative orthodoxy holds that paying out benefits just encourages Americans to be lazy. End of story. The fact that the United States is still reeling from the greatest economic disaster since the Great Depression and verging perilously close to a double-dip recession makes no difference. At the state level, the crackdown has already begun. A half-dozen states, with Florida leading the way, have already cut back on benefits while at the same time forcing the unemployed to jump through numerous, onerous hoops just to qualify for a check.

But what do the numbers actually say? The truth is, there is a consensus among economists that unemployment benefits do have a negative effect on the unemployment rate. But the estimates vary widely. Last August, Robert Barro, an economist considered "one of the ringleaders of the ultra free-market oriented "Chicago School," declared in a Wall Street Journal editorial that current unemployment benefits added a whopping 2.7 percentage points to the unemployment rate. Other economists have found much smaller differences. A study released by Goldman Sachs in January concluded that unemployment benefit extensions only added about .5 percent to the current unemployment rate. A study authored by three San Francisco Federal Reserve economists came up with a similar range -- 0.4-0.8 percent. In July, Berkeley economist Jesse Rothstein reviewed the most recent data and determined that unemployment benefits only added 0.3 percent to the total.

What explains the disparity? Rothstein told me that Barro looked at the number of people who currently fall into the category of long-term unemployed, compared it to the much smaller number of people who fit that category at a similar point after the 1981-83 recession and simply assumed that extended unemployment benefits accounted for all of the difference (even though the overall number of long-term unemployed had been rising long before the onset of the Great Recession.) But such reasoning ignores the substantial differences between the recession during Reagan's first administration and the current slowdown. Reagan's recession was largely artificially induced by Paul Volcker's efforts to quash inflation. Once Volcker started lowering interest rates again, the economy zoomed back up.

The Great Recession was something completely different, the result of a massive housing bust and a catastrophic financial crisis. Recovery has been slow, and even now, hampered by a wide array of global problems. Even today, there is still only one job available for every five job seekers. No matter how many hoops one makes job seekers jump through to get unemployment benefits, states are not going to be able to get their citizens to find jobs if none are available.

"It's just not plausible that anyone is going to turn down a job offer just to stay on unemployment another few months," says Rothstein.

If one accepts the much smaller figures offered by Goldman Sachs, the SF Fed, and Berkeley's Rothstein, then the resulting calculus becomes even more weighted against the conservative position. Because it only makes sense to balance the small negative impact that unemployment benefits might have on the unemployment rate with the relatively large impact unemployment benefits have as a stimulus measure. In January 2010, the Congressional Budget Office evaluated 11 policy proposals for stimulating the economy and concluded that out of all of them, extending aid to the unemployed got the most bang for the buck.

With another recession looming, extending unemployment benefits again shouldn't even be on the bargaining table. But even as winter threatens, you can bet your last dollar that Republicans will be even more unwilling, this time around, to extend a helping hand to the millions who lost their jobs through no fault of their own, and who are struggling to feed their families and keep a roof over their heads.

Compassion, anyone? Unfortunately, just doing the right thing has never been very easy to fit into a neoclassical economic model.

In the past few weeks alone, Bank of America, Goldman Sachs, Cisco Systems and Borders have all announced massive layoffs. Borders is closing its retail stores, auctioning off its holdings and letting go 10,000 employees as, due to online competition, the company is no longer profitable and filed for bankruptcy earlier this year. In contrast, Bank of America, Goldman Sachs and Cisco Systems have all posted profits in the last few quarters – in some cases, record highs. Alhough according to the latest data, 9.1% of Americans are unemployed, major US corporations are slashing jobs not out of necessity but out of greed.

The revived focus in Washington on creating jobs may be pointless if corporate America no longer needs workers. (photo: chantal foster)

A new report by Northeastern University's centre for labour market studies shows (pdf) that corporate downsizing, work hour reductions and the correlated growth of corporate profits directly led to the recession. Big business in America shed jobs and squeezed increased productivity from their remaining workers, but report authors Andrew Sum and Joseph McLachlan write: "None of these productivity gains was shared by wage and salary workers in the form of higher real weekly earnings." Instead, corporations increased their profits "at a higher relative rate than in any other post second world war recession."

Following the recession of the 1980s, 28% of the economic growth in recovery went to corporate profits, while 25% went to boost the wages and salaries of ordinary workers. Today, 88% of the economic recovery has gone to boosting corporate profits. As a widely cited earlier version of Sum and McLachlan's report finds (pdf), only 1% – that's one out of every $100 – has gone to wages and salaries for the folks who clearly need it most.

In the raw capitalist model, some percentage of people need to be unemployed – a point Karl Marx sharply critiqued and, later, John Maynard Keynes used to justify government's role promoting full employment. While any level of unemployment seems untenable to average Americans trying to pay their bills, economist-types have long accepted that, left to its own devices, the unemployment rate will never be zero. Ongoing 5% unemployment is considered the norm, though in February, the Federal Reserve Bank of San Francisco released a paper arguing that 6% unemployment might be the new baseline. But what if it's worse? What if we've reached a new low in unchecked capitalist greed that will perpetually drive up the unemployment rate as long as companies can keep extracting a profit?

The financial sector occupies an increasing share of America's economy. Between 1973 and 1985, the financial sector comprised 16% of domestic corporate profits. In the 1990s, it hit 30%. In the past decade, the financial industry's slice of the economy topped 41% – and it may even go higher. These businesses make money not by making things, but by making bets on other money. Employees sold separately.

Of course, companies have always played a sort of shell game with workers and revenues. The difference now may be that major players can generate profits just by playing the game, regardless of the outcome. A few blocks from where I live in Brooklyn, NY, the Maramont food manufacturing company with 150 decently paid union workers is moving operations to non-unionised Pennsylvania. The modern twist on this unfortunate but old story is that Goldman Sachs owns the small company – and if they don't make money off this scheme, they'll move the company to Bangladesh, or even get rid of workers altogether, or perhaps short their own holding and make money betting against Maramont. It's all the same to Goldman, as long as they make a buck. The workers, rather than essential parts of a productive economic engine, are now just pawns in high finance's game.

Most Americans are not Marxists. We want capitalism to work, generating earnings and opportunities – not just for Wall Street titans, but for ordinary working people. That, after all, is the essence of the American story. Yet, today's corrupt brand of capitalism would confound even Marx, who in his critique of the market's reliance on unemployment wrote, "[C]apital only increases when it employs workers." If extreme profit-making at the expense of ordinary workers continues to go unchallenged, Marx's criticism may seem more like nostalgia. If we do nothing to confront corporate greed, we will not create new jobs in America.

August 14, 2011

The private sector has added jobs in recent months, but government has lost jobs because Republican Governors are firing public workers. In July total private sector employment rose by 154,000 over the month, reflecting job gains in several major industries, including health care, retail trade, manufacturing, and mining. Government employment continued to decline mainly at the state and local levels which lost 39,000 jobs. The Federal level added 2000 jobs so the net new job creation was 117,000 jobs. At the state and local levels they are doing their level best to eliminate jobs and increase the unemployment rate at a time when the unemployment rate is approaching 10%. Republican Governors like Scott Walker in Wisconsin, Rick Scott in Florida, Rick Snyder in Michigan, Chris Christie in New Jersey and John Kasich in Ohio are doing everything they can to make the job situation worse so that Obama won't be reelected. If all those teachers, policeman, firemen and snow plough drivers hadn't been laid off, the unemployment rate would be a couple per cent lower. With the unemployment rate above 9% Obama's chances of being reelected are nil and Republicans aim to keep it that way.

Now they are going after the Post Office which is considering laying off 120,000 workers! This fiasco is being precipitated because the Republican Congress is forcing the Post Office to make overly huge payments into their pension fund thus causing a budget crisis. The fact that most U.S. citizens are using fewer USPS services due to improved electronic and computer communication, turns out not to be the main source of the problem. It turns out that the Post Office budget crsis has been totally manufactured by Republicans in Congress.

Postmaster Donahoe testified on Wednesday in the House of Representatives before the Subcommittee on Federal Workforce, U.S. Postal Service and Labor Policy on Oversight and Government Reform, a very long name for members sitting in judgment on how the USPS goes about its business.

In proposing more cost cutting for fiscal year 2011, Donahoe said $2 billion more will be eliminated from the Postal Service budget. Despite that and the $9 billion from the last couple of years, USPS cannot make ends meet without deficit spending and borrowing, in a mini-version of the total federal budget woes.

The fact that most U.S. citizens are using fewer USPS services due to improved electronic and computer communication, turns out not to be the main source of the problem. Congress learned from the Postmaster General that the decrease in usage and the attendant fees that they have taken out of the system rank second to “...the result of an inflexible business model due to the laws that govern the Postal Service.”

Most particularly, Donahoe cited a federal regulation instituted in 2007 that "...required the Postal Service to pre-fund retiree health benefits (RHB) in amounts of approximately $5.5 billion per year." There is no other entity in the federal bureaucracy that must abide by similar rules. There is a direct correlation, said Donahoe between the Postal Services' budget woes and the institution of the rule on RHB.

Audited financial results for the four years prior to RHB taking effect show the USPS running in the black. But for the requirements of the RHB, the Postmaster General insists the Postal Service would still be running within its budget and showing revenue above and beyond that. In addition to asking Congress to reconsider its decision to burden the agency in this way, Donahoe reiterated some familiar and introduced some new remedies for the budget woes.

Republicans are eliminating jobs and exacerbating the unemployment situation which dovetails very nicely with their "small government" quest. Just like Scott Walker created a budget crisis in Wisconsin by giving huge tax breaks to corporations and then attempted to balance the budget on the backs of the poor, the middle class and the unions, the Bush tax cuts are bankrupting the Federal government, and Republicans are calling for cuts in Social Security and Medicare. At all levels, Federal, State and Municipal, Republicans are creating crises and then calling for the elimination of public service jobs. It's the Shock Doctrine which they perpetrated unsuccessfully in South America, but now they're using it on their own country in order to turn the US into a banana republic just when the so-called banana republics are throwing off the yoke of neocon conservatism. The more jobs eliminated, the less the chances of an Obama reelection. God help us if a demigogue like Rick Perry gets into the White House!

Some Democrats have boldly suggested that the Federal government should create jobs directly, a move that Republicans would surely label as "socialist." Congresswoman Jan Schakowsky has a great jobs creation plan reminiscent of the Works Progress Administration and Civil Conservation Corps, plans developed by FDR during the Great Depression which Republicans are desperately trying to revisit. According to the Huffington Post:

WASHINGTON -- Rep. Jan Schakowsky (D-Ill.), a member of the Congressional Progressive Caucus, announced on Wednesday that she will introduce a progressive-minded budget outline aimed at putting more than two million people to work.

Titled the “Emergency Jobs to Restore the American Dream Act,” the plan would cost $227 billion and would be implemented over two years. It would be financed by separate legislation introduced by Schakowsky called the "Fairness in Taxation Act," which would raise taxes for Americans who earn more than $1 million and $1 billion. It would also eliminate subsidies for big oil companies while closing loopholes for corporations that send American jobs overseas.

The congresswoman said that her plan would create 2.2 million jobs and decrease the unemployment rate by 1.3 percent.

"If we want to create jobs, then create jobs," Schakowsky said in a press release. "I’m not talking about "incentivizing" companies in the hopes they’ll hire someone, or cutting taxes for the so-called job creators who have done nothing of the sort. My plan creates actual new jobs."

Schakowsky’s proposal reads more like a progressive wishlist than legislation likely to be signed into law. But it does provide a template of sorts to help Democrats frame their budget argument as lawmakers enter the high-stakes super committee negotiations.

Under her plan, the following policies would be implemented:

The School Improvement Corps would create 400,000 construction and 250,000 maintenance jobs by funding positions created by public school districts to do needed school rehabilitation improvements.

The Park Improvement Corps would create 100,000 jobs for youth between the ages of 16 and 25 through new funding to the Department of the Interior and the USDA Forest Service’s Public Lands Corps Act. Young people would work on conservation projects on public lands including the restoration and rehabilitation of natural, cultural, and historic resources.

The Student Jobs Corps would create 250,000 more part-time work study jobs for eligible college students through new funding for the Federal Work Study Program.

The Neighborhood Heroes Corps would hire 300,000 new teachers, 40,000 new police officers and 12,000 new firefighters.

The Child Care Corps would create 100,000 jobs in early childhood care and education through additional funding for Early Head Start.

The Community Corps would hire 750,000 individuals to do needed work in communities, including housing rehab, weatherization, recycling, and rural conservation.

In addition, the bill would give priority to the longterm unemployed -- the so-called "99ers" who have exhausted both their state and federal unemployment benefits. Federally extended unemployment benefits are set to expire this year, even though nearly 14 million Americans remain out of work and it takes the average worker nine months to find a new job.

“The worst deficit this country faces isn’t the budget deficit," Schakowsky said. "It’s the jobs deficit. We need to get our people and our economy moving again.”

So jobs would be created directly by the Federal government and the program would be funded by raising taxes on millionaires and billionaires. It would be a tax (on those who can afford to pay) and spend (in order to create jobs) bill. It would not add to the Federal budget deficit or national debt. What's not to like about this bill? Do you want "small government" or government which can cause an amelioration of the American peoples' lives? Do you want jobs and tax fairness or the present system of government of, for, and by the wealthy? Do you want "small government" in which swarms of lobbyists write the laws and drill holes in the tax code favoring large corporations or do you want government that provides social services like public schools, libraries, parks, post office, police and fire departments? Americans better get their heads on straight and stop voting for "political entertainers" like Michelle Bachman and Rick Perry.

If the American people demand that government should create jobs directly and tax the rich to do it, the unemployment rate will come down. The Republican controlled Congress would never pass such a bill so the only thing that can be done is to make sure that the elections of 2012 produce a Democratic controlled House, Senate and Presidency. Then maybe the US could be pulled out of its present morass and slough of despond. Otherwise, Great Depression II here we come!

August 05, 2011

My concern is our GDP growth rate is far too dependent on a 70-72% of GDP consumption level in a society that has experienced a 30 year trend of stagnant wages for the bottom 80% of households and a steady 30 year decline in the rate of job growth due to rapidly changing technology, automation, robotization, outsourcing, job downgrading. Given these developments, our paradigm of promoting high consumption, inevitably made worse by consumer over-leveraging and weak regulatory credit standards, results in an ever increasing demand for relatively inexpensive foreign goods and services as well as foreign capital. This in turn expands trade deficits, absorbs national savings, and expands foreign debt.

I believe this is no longer, if it ever was, a sustainable approach to achieving stable GDP growth rates of at least 3% annually. Stagnant wages and consuming at 70-72% of GDP automatically leads to declining saving rates. Decreasing or depleting middle-class household savings is NOT a sustainable way to create stable, long-term growth patterns. The most threatening hurdle to coming out of this economic quagmire is the disastrous unemployment and underemployment of +-28 million Americans – over 60% unemployed or underemployed for 6 months or more. And those fortunate to get a job in these times must accept substantial wage cuts. This structural jobless growth and job downgrading is contributing in a big way to our budget deficits (and the prevailing national mood of financial insecurity) … budget deficits that also tend to accelerate trade and current account deficits.

After tax household income is about 75% of GDP. Thus, a household savings rate now of 6% is just 4.5% of GDP. Adding in corporate savings averaging 3% of GDP brings total private savings to +-7.5% of GDP (vs. almost double that in mature EU countries). A CBO study projects that U.S. budget deficits will average 5.2% of GDP over the next decade and 5.5% thereafter – leaving a net private savings rate of +2.5%. This borrowing level exhausts our modest savings and means that the U.S. has a continuing need for large foreign capital inflows to finance business investment. In contrast, prior to the early 1990s, household savings in excess of 8% of GDP plus corporate savings were sufficient to finance most business investments in plant, equipment and housing.

The high consumption-low savings-stagnant wages paradigm in combination with high budget deficits compounds the dependence on foreign borrowings as trade and current acccounts deficits rise to new risk levels. This is because domestic demand (under this paradigm) exceeds domestic output. The shortfall has to be met by imports, i.e., higher trade and current account deficits. The demand on the world’s credit caused by foreign borowings cannot be met by savings, nor are savings adequate to fund private investment. This is poignantly evidenced by a 40 year non-investment in decayed infrastructure and sub-par educational systems. (Of course, 5.5% of GDP Defense spending has also played a major role inducing deficits and choking off societal investment's role ). A recent CBO study concludes that our continuing budget deficits will transfer more and more U.S. income to the rest of the world the next decade, further eating away the living standard of middle-class Americans.

While trade and current account deficits have dropped from a peak of 6% of GDP in 2005 to 4.5% today as a result of the recession, most economists see this reversing in the intermediate term as consumption rises. I don't think this necessarily also means household savings will decline to pre-crisis lows of less than 3% of GDP to help spur consumption back to 70-72% of GDP. The great recession caused an enormous loss of middle class wealth, broad- scale structural joblessness, related considerable household insecurities, home foreclosures, deleveraging, and tougher credit terms. I feel all this will motivate middle-class Americans to stay in a stronger savings mode for some time. So I'm in the camp of those like Martin Feldstein who believe household savings will climb back to ±8% of GDP. A possible reduced consumption in the range of 65% of GDP could occur, stabilizing trade /current account deficits providing the dollar’s value remains weak, making exports more attractive to foreign buyers.

Obama's emphasis on exports rather than consumption is wise policy. But it won't work well until decent wages and jobs come back for working Americans. In the past, stagnant wages/salaries have driven the middle class to buy cheap imports with the domino negative deficit/debt effects. Sustainable job stimulus and training, balancing the budget in good times, encouraging greater savings (despite negative short-term effect on consumption) are the most reliable ways to stabilize U.S. foreign deficits and debt. Some related financial rules should be: net annual debt buildup not to exceed annual GDP growth; combined trade and current account deficits not to exceed 3% of GDP, as recommended by Paul Volcker; and budget deficits not to exceed 2% of GDP.

The latter also means, as noted above, the dollar's value must remain low to make U.S. products and services more attractive to foreign buyers and ultimately more attractive to U.S. buyers.

I am not saying higher savings are the cure-all to the multi-faceted economic mess we are in. They are a critical Part-Cure. (Some are saying a VAT will stimulate more savings and substantial tax revenues. But this gives the anti-tax cult a brain hemorrhage). Our low savings rate has forced us to be far more dangerously dependent on funds from abroad. According to Martin Feldstein, such funds have been financing more than 75% of U.S. net investment.

As stated, improving our national savings is a very important Part-Cure to our nation’s financial problems. Balancing the budget and controlling debt levels,investing in sustainable renewal projects are the priority needs. Seeking an economic renaissance by excessive dependence on High Consumption-Low Savings is a No-Cure approach to our problems.

In simple terms, we've got to confront the deeply rooted out-of-balancecomponents of GDP growth in our economic model, namely excessive Consumption and Current Account Deficits that are choking Private and Public Investments … in a situation of meager net national savings, stagnant wage growth, and massive structural joblessness. The components of GDP growth are not working well together at all in our economic model:

The fiscal and growth strategies suggested herein and in PARTS I & II in answer to our economic breakdowns are but one citizen's challenge for America's best and brightest to get the final strategic priorities right for ALL Americans.

Note:Household saving is the difference between what households receive inafter-tax income (including wages, salaries, fringe benefits, interest, anddividends) and what they spend on goods and services. Those savings can take the form of bank deposits (popular in Europe), purchases of financial assets such as stocks and bonds, or investments in real assets such as homes and unincorporated businesses. Contributions to individual retirement accounts (IRAs) and 401(k) plans ) as well as employer contributions to defined-benefit pension plans are also counted as household savings.

Note: EU countries spend less than 2% of GDP on Defense; have high Private Savings rates; generous social-nets; progressive tax systems, and a much, much lower disparity between high/low income and wealth classes.

July 26, 2011

One universe is the one in which most Americans live. In it, almost 15 million people are unemployed, wages are declining (adjusted for inflation), and home values are still falling. The unsurprising result is consumers aren’t buying — which is causing employers to slow down their hiring and in many cases lay off more of their workers. In this universe, we’re locked in a vicious economic cycle that’s getting worse.

The other universe is the one in which Washington politicians live. They are now engaged in a bitter partisan battle over how, and by how much, to reduce the federal budget deficit in order to buy enough votes to lift the debt ceiling.

The two universes have nothing whatever to do with one another — except for one thing. If consumers can’t and won’t buy, and employers won’t hire without customers, the spender of last resort must be government. We’ve understood this since government spending on World War II catapulted America out of the Great Depression — reversing the most vicious of vicious cycles. We’ve understood it in every economic downturn since then.

Until now.

The only way out of the vicious economic cycle is for government to adopt an expansionary fiscal policy — spending more in the short term in order to make up for the shortfall in consumer demand. This would create jobs, which will put money in peoples’ pockets, which they’d then spend, thereby persuading employers to do more hiring. The consequential job growth will also help reduce the long-term ratio of debt to GDP. It’s a win-win.

This is not rocket science. And it’s not difficult for government to do this — through a new WPA or Civilian Conservation Corps, an infrastructure bank, tax incentives for employers to hire, a two-year payroll tax holiday on the first $20K of income, and partial unemployment benefits for those who have lost part-time jobs.

Yet the parallel universe called Washington is moving in exactly the opposite direction. Republicans are proposing to cut the budget deficit this year and next, which will result in more job losses. And Democrats, from the President on down, seem unable or unwilling to present a bold jobs plan to reverse the vicious cycle of unemployment. Instead, they’re busily playing “I can cut the deficit more than you” — trying to hold their Democratic base by calling for $1 of tax increases (mostly on the wealthy) for every $3 of spending cuts.

All of this is making the vicious economic cycle worse — and creating a vicious political cycle to accompany it.

As more and more Americans lose faith that their government can do anything to bring back jobs and wages, they are becoming more susceptible to the Republican’s oft-repeated lie that the problem is government — that if we shrink government, jobs will return, wages will rise, and it will be morning in America again. And as Democrats, from the President on down, refuse to talk about jobs and wages, but instead play the deficit-reduction game, they give even more legitimacy to this lie and more momentum to this vicious political cycle.

The parallel universes are about to crash, and average Americans will be all the worse for it.

July 22, 2011

“Good people are out there (edit: fighting the ordinary folks fight and exposing the financially destructive, narrow-minded Republican cut spending and taxes policy). They just aren’t getting the media exposure the other side is.”

Your words are right on, John, and reflect “the same old story” of right-wing ideological domination of the public political dialogue, mastering the indoctrination art of repeated, simplistic one-liners through media channels bought by powerful special-interests’money.

A huge inequality in income and wealth in a deregulated environment caused people to go into debt to consume or borrow against the inflated value of a house. The social-economic morass we are now in shows no light at the end of the tunnel. How do we come together finally to come out of the MESS we are in?

PART 1

What Is The Republican Agenda For America?

“DOWN with deficits, debt, government spending and UP with jobs by LOWER taxes mainly for the rich.”

This is the Boehner, McConnell, Cantor, Bachman Incorporated fiscal paradiseshift for America … in reality, it’s an agenda to make government small by “starving the beast.” Welcome to the resurrection of Newt Gingrich’s “Contract for America” fiasco. Successor deciple Boehner has assumed the pledge of government’s demise with his recent words: “We need to end the job-killing binges by the federal government,…, and then we need to turn attention to killing the job-killing health care law.” The irony that passes over his head conveniently is that the Republicans did a marvelous job killing ALLjobs the last decade!

Only problem is this lean and mean paradigm will increasingly starvewhat’s left of middle-class Americans in an economy where job growth, aggregate demand and private investment remain stagnant with ±28 million people unemployed or underemployed … all reinforcing a vicious circle of ever lower demand, risk of spiraling deflation, and thus more unemployment.

Let’s bear in mind the last decade was the Lost Decade for working people with near ZERO job growth and annual GDP growth rates of 1.9%, close to 1.3% in the 30s Great Depression. We now have both private and public jobs being wiped out at all levels – a recipe for an ongoing financialrelapse and continuing deficits (similar to Japan’s 1992-2004 economic stagnation).

As most informed Americans well know by now, tax cuts, mainly benefiting the rich, accelerate deficits and do little to create jobs (as Reagan found out much to his surprise). The right wing never stops lying about this much proven point.

However, as stated, the Republican priority is not lower deficits but smaller government and Obama’s defeat in 2012 – no matter the disproportionate economic sacrifices inflicted on ordinary Americans.

A creative, balanced, pragmatic BLEND of austerity measures and renewal policy solutions in the interests of everyone – middle-class as well as the upper class – clearly is not a driving Republican priority. Ignored is the persistent recession middle-class squeeze (building up over 30 years) with lost jobs and lost home equity and retirement savings.

How Will A Balanced Budget Amendment To The Constitution Help?

Republicans are now proposing a tough Balanced Budget Amendment (BBA) to come to grips with the soaring repetitive federal budget deficits – presumably formulated so as not to inflict greater pain on the working class, but of course this is the million dollar question.

In my opinion, the Republican initiative for a BBA could be a good idea providing it didn’t duplicate on a national level California’s catastrophic BBA experiment passed in Reagan’s time as Governor … and providing the language didn’t mirror an anti-government mission or incorporate strictures further harming the very vulnerable middle-class.

The Amendment as now formulated will:

Require Congress to balance the Federal Budget each year

Prevent Congress from spending more than 18% of GDP

Require a 2/3 supermajority vote to raise taxes

The argument is that most states already have some form of BBA. This is true. BUT, the inevitable state and local budget shortfalls that frequently occur are by necessity greatly offset by recycled federal taxpayer funds. Without such support funds, most states would be in even more dire financial straits today (and would have been historically).

California, for example – despite federal funds support and emergency, panic implementation of other local taxes/fees – still has a ±$25 billiondeficit – and climbing under its statute enforced BBA rules. Why is this? The answer is: insuffcient tax revenues caused by the state’s BBA over the years. (Ed. note: California has a 2/3 majority requirement in order to raise taxes put in under Prop. 13 which also is driving the deficit. Despite Democratic control of all three branches of government, California could not close it's budget gap because they were a few votes short in both Houses this year to raise taxes.) So what can be done in such a situation? Simple … fire teachers, firemen, policemen, government service providers; destroy Union collective bargaining rights; reduce social net benefits, etc. Result? State deficits and social instability are rising to inhuman proportions. This self-destructive practice on a national scale under a federal Balanced Budget Amendment would be disastrous.

The EU has a simple rule for controlling state budget deficits. The rule requires that a deficit not exceed 3% of GDP, with allowances for emergencies. When pro-actively enforced under effective warning signals – which wasn’t done for Greece, Ireland, Spain, and Portugal – it has worked reasonably well for the mature EU countries.

In short, if a federal BBA is to be given serious consideration, it should Not be based on the three key provisions noted above. Such an Amendment should incorporate the following refinements, without riddling it with loopholes:

Require that annual budget deficits not exceed 2% of GDP

Prohibit by statute federal government borrowing from Social Security Trust Fund to cover other deficit spending. In past years, trust fund surpluses amounting to over $2 trillion have been siphoned off by the federal government borrowings in exchange for Treasury notes. This conceals the true nature of normal federal budget shortfalls and diverts taxpayer funds from a trust fund most Americans assume is for their minimum old-age pensions.

Prevent Congress from spending more than 20% of GDPin any year which could be waived in times of recession, environmental disasters, war or military conflict. The 18% of GDP cap is far too low. It would have our country – with its no-holds barred, winner takes all political infighting culture – frequently meshed in enduring controversial budget storms. Result? The Supreme Court starts to run the country’s business.

Federal spending as a % of GDP in past decades was as follows: 17.8% in 1960; 19.5% in 1970 (Vietnam War); 21.7% in 1980; 22.8% in 1985 (Reagan’s increased Defense budget and lower taxes for rich); 21.9% in 1990 (Iraq War); 18.2% in 2000 (under Clinton); 19.9% in 2005 (under Bush Jr. with 2 wars); 25.4% in 2010 (under Obama with 2 wars, a nation still suffering from the Great Recession depressing GDP growth, tax revenues).

It is felt that a supermajority requirement for Congress and each state to raise federaltaxes will hamstring flexibility of central and local government initiatives in running operations with a minimum of paralysis from extended infighting (as happens in California). Moreover, a2/3supermajority requirementwould give an even greater advantage and incentive to thewealthy (e.g. Kochs) and corporate special interests to buy political and media influence toprevent the 2/3 majority from happening -- bringing our democracy that much closer to an oligarchy "of the rich and powerful, by the rich and powerful, for the rich and powerful."

How Much Has Our National Debt Grown In Past Decades?

The ultra-right especially and media pundit sensationalists tend to play on the public’s fear or preconceptions by manipulating and often misrepresenting government financial performance data. The lying machine is alive and speeds up in times of crisis. This has been occuring lately in discussions around raising the debt ceiling. It has occured when discussing the origins of our $13.8 trillion national debt, yearly deficits, and “Who is responsible.”

While the evidence shows both parties are responsible, it also shows that almost 70% of the $12.9 trillion increasein the national debt – after Pres. Carter’s last year office in office in 1980 – hashappened on the watch of Republican Administrations (see TABLE 1). Below is a factual statement of origins of past debt growth … typical data so often used in a distorted blame game to misguide or dumb down the general public’s understanding.

So much for the Republican double talk that those profligate liberals, with Obama in the vanguard now, are the BIG SPENDERs causing most of the expansion in national debt over the last 31 years. In fact, the really big Republican spenders and deficit producers were Reagan, Bush Sr., Bush Jr.

Reagan to his great credit saw that “tax decreases don’t pay for themselves” as debt and deficits rose steeply in his first term of office, not helped by sharply increased Defense spending. Reagan got caught up in the “Trickle Down” political-economic con game that lowering taxes for the rich reduces deficits and increase jobs. Reagan ended upRaising Taxes 11 times. Bush Sr. also saw the need to increase taxes.

Tragically, Bush Jr. (and Greenspan) didn’t respect the junk economics of “Trickle Down” calling for reducing taxes largely for the wealthy because this increases jobs – a line Boehner robotically repeats to the party faithful. The truth is that the modest 2001-07 economic expansionperiod produced lackluster tax revenue growth and an anemic 6.2 million jobs.(see study: U.S. Pattern ofStructural & Long-Term Joblessness ).

The meager 6.2 million job increase over 7 years evaporated when ±8 million jobs were lost in the 2008-09 Great Recession. After 2009, the Great Recession was thought to be finis, but the job and growth crisis is still unfolding. No need to worry though, the deficits and debt will magically disappear by firing government workers at all levels and lowering taxes to expand jobs. If you believe this financial math wizardry, you're drinking too much wine.

PART II

How Is Our Economic Development Affected by the Global Economy?

There are critical structural challenges to our economic system in a technically fast-evolving, tightly integrated global economy. An economy where emerging nations with lots of cheap labor and sustainable +8% GDP growth rates are placing severe competitive pressures on existing scarce natural resources, on the income, wealth and job opportunities of advanced nations. Our national debt escalation is but a serious symptom of these underlying global changes affecting future growth dynamics.

Some of these structural factors are:

U.S. Consumption at 70-72% of GDP (vs. 60% in Europe) is not sustainable with huge trade deficits. This dependence combined with stagnant wages inevitably exhausts savings, accelerates credit levels (i.e. living beyond one’s means) to buy cheap imports offsetting stagnant wages, drives up trade deficits to new astronomical levels, and reduces system liquidity for desperately needed societal improvements. With a national debt structure approaching 100% of GDP, this economic vicious circle will only lead to repeated social-economic crises. Lower consumption patterns will be an increasingly negative factor affecting future aggregate demand and our economic model. More on this later.

New labor-saving technology, automation, robotization, outsourcing, job downgrading, also means relatively fewer decent jobs in coming years – particularly job opportunites for the less well-educated in a world favoring high-value-added jobs. The Wall Street Journal recently reported that the top U.S. firms cut 2.9 million jobs in the last decade – a Zero job growth decade – while hiring 2.4 million overseas.

A structurally slower rate of job growth started in the 80s, slowed down substantially to less than 1% in 2001-07 and peaked to below zero in the 2007-09 crisis bubble. Recently, there has been a slowdown in the low-value-added service job sector – retail, hotel, restaurant, construction, health-care, government jobs – providing over 90% of all new jobs in the past two decades. This slowdown cannot be regained by the much smaller high-value-added job sector of the well-educated in computer science and design, finance, consulting services, engineering and production of products. Manufacturing activities have declined considerably the last 30 years. They now provide jobs to less than 8% of the workforce vs. 22% in 1980 and vs. +20% in Germany today – expanding Germany’s job opportunities, technical knowhow and breadth as well as trade surpluses. Meanwhile, U.S. jobs are growing less in both low-tier and high-tier job sectors adding other pressures on the nation’s ability to continue Consumingat 70-72% of GDP.

Our economic model is structurally out-of-balance, relying far too much on consumption for GDP growth with stagnant wages driving cheap imports and massive trade deficits made worse by polluting fossil fuel imports. Under our economic model, hightrade deficits reduce GDP so much we are forced into an abnormal dependence on consumptiontriggering irresponsibledebt expansion and the next financial crisis.

We are in a losing battle with the GDP formula for growth: GDP = Consumption + Private Investment + Public Investment + Net Exports.

Our GDP growth rate is greatly depressed by huge trade deficits, which in turn depress private and public investments, which in turn drive our economy into a high consumption dependence with all the negative consequences. The current jobless GDP growth may comfort the few winners, but it’s a bankrupted development. The GDP components of growth are relatively much more in balance in mature EU countries with low net exports (trade deficits), higher private and public investments, much lower consumption (+-60% of GDP) and thus far higher savings (10-12% of GDP), adding more liquidity and stability to the entire social-economic system.

Until we learn how to get our economic model in better balance with the GDP components of growth, we are systemically destined to social-economic manic depression Ups and Downs, testing the barrier of an eventual complete breakdown!

The economic model puzzle is how can the mature EU countries, where annual GDP growth averages about 10% less than ours, still have a decent living standard, no excessive trade deficits, lower unemployment levels (excepting the weaker countries under great stress now), stabilizing social-nets, active innovation and entrepreneurship … anddo thiswith higher marginal tax rates?

Propagandists like to say that redistributing existing wealth by progressive taxation does not create wealth. Only low taxes spur economic growth and net tax revenue growth. Reagan found such claims to be completely FALSE; as did Bush Jr. but would never admit it; false also to the Germanies, Hollands, Swedens, Denmarks, Norways, etc., of this world; false also according to CBO study showing that tax cuts replace 22% of lost tax revenuethe first 5 years, rising to replace 32% of lost tax revenue the second fiveyears. In layman’s language: a $1 million tax cut would generate a $780,000 deficit in each of the first 5 years and a 680,000 deficit in each of the second 5 years!

TABLE 2 shows that the compositions of federal tax receipts from individuals, corporations, retirement receipts (Social Security), excise and other taxes have been getting Smaller or Stagnant in recent decades:

Individual taxes are extremely significant and stable contributing about 45% of all federal taxes. About 70% of all individual taxes are paid by the top 10% income bracket. Thisgroup earns +-48% of all reported income and owns 70% of all household wealth. Of course, conservative propagandists focus only on the 70% of individual taxes paid figure, ignoring the top 10% group's remarkably high absolute growth in income and wealth at the modest effective tax rate of +-20% -- of course,after exploiting all the tax loopholes, including 15% capital gains tax.

Hey, Mr. Boehner, do you hear me? The upper 1%-5%-10% income earners pay more taxes because of the huge increases in their income and wealth. Consider this FACT Mr. Boehner: Over the past three decades, 34.6% of all income growth went to the top 0.1% of all earners! In contrast, 90% of all earners have collectively seen only 15.9% of all income growth over the same period (Source: Economic Policy Institute, Feb. 2010). Republican propaganda that the rich are overtaxed is the party’s lie machine working overtime. Conclusion on individual taxes? Any dropping of the top income earners' taxes, besides increasing federal deficits and further exploding the income/wealth gap, will endanger the critically important, stable tax contribution of these taxes.

Same applies to corporate taxes which have declined 50% from 21% of all taxes in the 60s to 10% the last decade. Republicans and some Democrats, to pleasetheir election financiers, propose dropping the statutory corporate tax rate from 35% to 25%, knowing that the current corporate effective tax rate is at 25%. So, with all the loopholes and special deductions, this means the proposed 25% statutory rate will drop to a new low effective rate of +-18% range! This would have a disastrous effect on the already tiny, tiny percentage contribution of all taxes corporations already make to the nation's tax revenues. It would also raise pressure to increase individual taxes, add to deficits and intensify existing make-shift panic practices of many states to find other taxes in all directions to compensate for insufficient local revenues and federal funds.

Retirement receipts (Social Security) have been stagnating as a percentage of all taxes the past 30 years. In combination with the aging population and people living longer, this points to the need to improve the contribution of retirement receipts and/or reduce outflows by resetting retirement age to 67, doing away with benefits for millionaires, discontinuing the government practice of borrowing from the trust fund, and starting to refund the over $2 trillion accumulated government borrowings from trust fund (though legally done).

Excise taxes have all but vanished as a % of all federal taxes, dropping from 11% of all taxes in the 60s to 3.2% the last decade. Besides contributing to the extraordinary wealth gap in America, this is just another factor squeezing our nation's overall tax revenue base to the primary benefit of the rich.

Conclusion: It's financial suicide to be recommending reducing marginal tax rates on the rich unless compensated for by serious tax reform that removes tax loopholes and special deductions. New taxes having no notable negative effects on deficits and aggregate consumer demandare still a critical (tax reform or not) dire need to reduce deficits/debt while also investing in our society’s renewal. It’s impossible to just cut our way out of deficits and debt!

What Blend of Balanced Solutions Deserve Consideration?

A balanced strategy mix around which to design a prudent tax and financing policy should embrace the following goals:

(4) Reduce tax loopholes and simplify a tax structure so complex that even Warren Buffet stated recently he had a lower tax rate than his secretary

(5) Limit deductibility of interest on residential real estate (as the Netherlands is now planning to do) especially on second homes

(6) Reduce unaffordable Defense spending back to 3.5% to 4% of GDPover next 5 years – potential annual savings $200 billion (Obama Administration's recent $50 billion savings target is a joke. This out-of-control cost center contributes at least three times that amount to our annual deficits.

(7) Re-examine unfair trade practices as our current account deficits are no longer sustainable. Financing $40-65 billion a month trade deficits robs liquidity for investments in our society. Furthermore, it’s going to be increasingly difficult, if not impossible, to finance trade deficits even at a higher interest rate for Treasury notes. The sheer scale of trade deficit growth is nothing but ominous, rising from $132 billion in the 70s, to $940 billion in the 80s, to $1,457 billion in the 90s, to $5,636 billion in the 2000s (i.e., $5.6 trillion).

(8) Provide incentives for aggressive expansion of worker-manager owned Cooperatives that place profit and concern for people and communities on a more equal plain. Cooperatives bring money circulation closer to communities, reduce trade deficits, and expand jobs by more buying and producing of products at home.

SUMMARY

Let's not forget there's a minimum safety net in the U.S. The whole society has always been based on the assumption that new work is around the corner. We are in a dramatically changing world where such hopes are getting far more difficult to realize. Structural unemployment and underemployment sends too many people into a descending spiral: job degraded, health care coverage lost, auto lost, home lost, job lost, family lost … FOOD STAMPS!

The human challenge can't be better portrayed than in this painful job debacle picture (TABLE 3) that omits the ugly trend of a permanent drop in wages for those lucky enough to find work.

TABLE 3 UNEMPLOYED AND UNDEREMPLOYED IN MARCH 2011

A. Officially defined as unemployed (a) 13.5 million

B. Persons not in the labor force but wanting a job 6.5 million

C. Working part time but desiring full-time work 8.4 million

TOTAL 28.4 million

(a) Revised to 14.1 million June 2011

SOURCE: U.S. Dept. Of Labor, Bureau of Economic Research

When all is said and done, the U.S. challenge is to find a sound fiscal and human balance in our nation’s renewal process that benefits ALL Americans.

Purist ideology and orthodoxy must be set aside … if we are to recapture those unique American creative, pragmatic, dynamic skills. This requires courage to try new initiatives such as reducing the number of jobs exported that should stay at home … such as getting our house on a solid financial footing while investing in renewal … such as getting off the fossil fuel cocaine. These goals need not be mutually exclusive.

I want to be optimistic that our broken, polarized political climate will step up, come together to make the necessary changes … while at the same time recognizing this may only be possible by the common folk finally fighting back to get justice, the true facts, the development options, and a fair share of the pie in a more level playing field.

July 09, 2011

I have recently written a series of columns about jobs with titles such as "An angry dissent," and today's disastrous numbers are a political game changer. All incumbents of both parties are threatened if jobs are not created in large numbers by Election Day 2012.

This is one of the great outrages in political history. Neither party is now proposing a major jobs program. While the Republican Party at the national and state level is doing everything it can to destroy jobs, the Democratic Party is failing to fight for jobs with the intensity that Democrats have historically done. Meanwhile, the Democratic president does photo-ops, Twitter events and mini-jobs programs of the magnitude of school uniform trivia.

It is an outrage, a crime, a sin against decency and a defamation against everything I personally believe that nobody, I repeat nobody, in the high councils of politics gives a damn about those who have been jobless for 99 weeks. This violates my faith as a Christian, where we are supposed to help those in need. It violates my values as a Democrat, where we are supposed to fight for jobs. It violates the most common-sense economics, which proves that help for 99ers provides more stimulus than tax cuts for the wealthy, but since the 99ers would have to spend the money from assistance, to live.

The president's political brain David Plouffe now suggests that voters will not vote based on the jobless rate. This is ridiculous, absurd, delusional and symptomatic of a president far out of touch with the realities of working-class Americans who is clueless in confronting Republicans who believe in firing police, firefighters, teachers and librarians.

The jobless rate is a scandal.

The plight of the 99ers is a moral outrage.

The disastrous jobless numbers today will add to the political earthquake of a nation that demands jobs and is outraged by Washington power brokers who show no signs of caring, understanding or acting.

Shame on the president. Shame on the Republicans. Shame on the Democrats. Shame on the media. Shame on them all.

It is time to cut the crap, create the jobs and fight like hell for what Americans want: jobs.

I continue my angry dissent today.

The horrendous and disastrous jobs numbers announced this morning are a thunderbolt reminder of the jobless plague that grips our nation.

If the jobs are not created soon there will be more incumbents, from both parties, who will join the jobless after the next change election in 2012.

The big story out of Washington—and rightly so—is the debt-ceiling fight that President Obama seems to be coming very close to losing. If the president abandons his 2008 campaign promise to be an absolute defender of Social Security, Medicare and Medicaid, he will have very little indeed to run on in 2012.

But that won't be what beats him.

Because the biggest story in America is a different one from the biggest story in Washington. Americans are not that into the debt-ceiling debate. Polling has suggested that less than a quarter of Americans are "closely following" the fight. Those numbers will rise a bit as the deadline gets closer and as the media hypes the issue.

The issue that Americans have been following closely, and will continue to follow straight through the 2012 election cycle, the issue that tops the polls on the list of concerns, is the jobs crisis. Americans are worried about unemployment and underemployment.

The 9.2 percent official unemployment rate—up from 9.0 percent two months ago and 9.1 percent a month ago—is only a pale shadow of the real rate. Categorized in official terms as the "U6" unemployment, the real rate includes the offically unemployed as well as Americans who are underemployed and those who have given up on the search for work. It stands at more than 16 percent nationally. And in depressed states, such as Michigan (which Obama carried handily in 2008 but where his approval ratings are now troublingly low), it is well over 20 percent.

The official and the real unemployment rates are devastating. These numbers are some of the worst since the Great Depression. But they are not getting the response that high unemployment rates got from Democrats in the Depression era of other periods of economic downtown in the years since.

President Obama and his team have never focused on job issues with the intensity that is needed. And now they are simply being ridiculous.

Speaking to reporters this week, Plouffe said, “The average American does not view the economy through the prism of GDP or unemployment rates or even monthly jobs numbers. People won’t vote based on the unemployment rate, they’re going to vote based on: ‘How do I feel about my own situation? Do I believe the president makes decisions based on me and my family?’ ”

The almost 10 percent of Americans who are officially unemployed probably don’t feel all that great about their situation. The same goes for the the tens of millions of additional Americans who are underemployed or who have fallen off official radar because they have given up on the search for work in communities where there are simply no jobs to be had.

The unemployed, the underemployed and the abandoned add up to almost one in five Americans. And an awfully lot of them live in battleground states such as Indiana, Michigan, Ohio and Pennsylvania —all of which President Obama won in 2008, all of which President Obama needs to win in 2012.

Now, let’s be clear, no one in their right mind thinks that Republicans who would be president are any more concerned about jobless Americans than is the Obama administration.

But neglecting unemployment as an issue—or presuming, as Plouffe does, that Americans will give Obama the benefit of the doubt—is political madness.

When unemployment reaches the level that it has nationally, and the even higher levels that it has in battleground states, potential Obama voters start losing faith that "the president makes decisions based on me and my family."

Some of the disappointed may still vote for Obama out of fear of the Republicans, some will find social issues that draw them to the Republicans, but millions will simply stay home —as they did in 2010.

That's the danger heading into the 2012 race, and it is more profound today that at any time in Barack Obama's presidency.

Obama is toying with the notion of running for reelection as the president who did what George Bush could not: cut Medicare, Medicaid and Social Security.

That calculus suggests that Obama and his team really are out of touch with the electoral dynamic.

While the president's apparent willingness to take the best argument available to Democrats going into the 2012 election cycle—the promise that they will defend Medicare, Medicaid and Social Security—suggests that Obama learned nothing from the Democratic party's devastating electoral experience in 2010, his top political aide's statements with regard to unemployment suggest that his team has learned even less.

No president since Franklin Roosevelt has won reelection when the unemployment rate was over 7 percent. And Roosevelt won because he ran as a candidate who was fully willing to use the power of the federal government to create jobs —and programs like Social Security.

The notion that a Democratic president can win reelection with an unemployment rate that is edging upward—perhaps toward double digits—and talk of cutting Social Security is not merely unrealistic. It is evidence of a disconnect that could devastate not just Obama's reelection campaign in 2012 but Democratic prospects for years to come.

July 05, 2011

Like the country it governs, Washington is a city of extremes. In a car, you can zip in bare moments from northwest District of Columbia, its streets lined with million-dollar homes and palatial embassies, its inhabitants sporting one of the nation's lowest jobless rates, to Anacostia, a mostly forgotten neighborhood in southeastern D.C. with one of the highest unemployment rates anywhere in America.Or, if you happen to be jobless, upset about it, and living in that neighborhood, on a crisp morning in March you could have joined an angry band of protesters marching on the nearby 11th Street Bridge.

They weren't looking for trouble. They were looking for work.

Those protesters, most of them black, chanted and hoisted signs that read "D.C. JOBS FOR D.C. RESIDENTS" and "JOBS OR ELSE." The target of their outrage: contractors hired to replace the very bridge under their feet, a $300 million project that will be one of the largest in District history. The problem: few D.C. citizens, which means few African Americans, had so far been hired. "It's deplorable," insisted civil rights attorney Donald Temple, "that... you can find men from West Virginia to work in D.C. You can find men from Maryland to work in D.C. And you can find men from Virginia to work in D.C. But you can't find men and women in D.C. to work in D.C."

The 11th Street Bridge arches over the slow-flowing Anacostia River, connecting the poverty-stricken, largely black Anacostia neighborhood with the rest of the District. By foot the distance is small; in opportunity and wealth, it couldn’t be larger. At one end of the bridge the economy is booming even amid a halting recovery and jobs crisis. At the other end, hard times, always present, are worse than ever.

Live in Washington long enough and you'll hear someone mention "east of the river."That's D.C.'s version of "the other side of the tracks," the place friends warn against visiting late at night or on your own. It's home to District Wards 7 and 8, neighborhoods with a long, rich history. Once known as Uniontown, Anacostia was one of the District's first suburbs; Frederick Douglass, nicknamed the "Sage of Anacostia," once lived there, as did the poet Ezra Pound and singer Marvin Gaye. Today the area's unemployment rate is officially nearly 20%. District-wide, it’s 9.8%, a figure that drops as low as 3.6% in the whiter, more affluent northwestern suburbs.

D.C.'s divide is America's writ large. Nationwide, the unemployment rate for black workers at 16.2% is almost double the 9.1% rate for the rest of the population. And it's twice the 8% white jobless rate.

The size of those numbers can, in part, be chalked up to the current jobs crisis in which black workers are being decimated. According to Duke University public policy expert William Darity, that means blacks are "the last to be hired in a good economy, and when there's a downturn, they're the first to be released."

That may account for the soaring numbers of unemployed African Americans, but not the yawning chasm between the black and white employment rates, which is no artifact of the present moment. It's a problem that spans generations, goes remarkably unnoticed, and condemns millions of black Americans to a life of scraping by. That unerring, unchanging gap between white and black employment figures goes back at least 60 years. It should be a scandal, but whether on Capitol Hill or in the media it gets remarkably little attention. Ever.

The 60-Year Scandal

The unemployment lines run through history like a pair of train tracks. Since the 1940s, the jobless rate for blacks in America has held remarkably, if grimly, steady at twice the rate for whites. The question of why has vexed and divided economists, historians, and sociologists for nearly as long.

For years the sharpest minds in academia pointed to upheaval in the American economy as the culprit. In his 1996 book When Work Disappears, the sociologist William Julius Wilson depicted the forces of globalization, a slumping manufacturing sector, and suburban flight at work in Chicago as the drivers of growing joblessness and poverty in America's inner cities and among its black residents.

He pictured the process this way: as corporations outsourced jobs to China and India, American manufacturing began its slow fade, shedding jobs often held by black workers. What jobs remained were moved to sprawling offices and factories in outlying suburbs reachable only by freeway. Those jobs proved inaccessible to the mass of black workers who remained in the inner cities and relied on public transportation to get to work.

Time and research have, however, eaten away at the significance of Wilson's work. The hollowing-out of America's cities and the decline of domestic manufacturing no doubt played a part in black unemployment, but then chronic black joblessness existed long before the upheaval Wilson described. Even when employment in the manufacturing sector was at its height, black workers were still twice as likely to be out of work as their white counterparts.

Another commonly cited culprit for the tenaciousness of African-American unemployment has been education. Whites, so the argument goes, are generally better educated than blacks, and so more likely to land a job at a time when a college degree is ever more significant when it comes to jobs and higher earnings. In 2009, President Obama told reporters that education was the key to narrowing racial gaps in the US. "If we close the achievement gap, then a big chunk of economic inequality in this society is diminished," he said.

Educational levels have, in fact, steadily climbed over the past 60 years for African Americans. In 1940, less than 1% of black men and less 2% of black women earned college degrees; jump to 2000, and the figures are 10% for black men and 15% for black women. Moreover, increased education has helped to narrow wage inequality between employed whites and blacks. What it hasn't done is close the unemployment gap.

Algernon Austin, an economist for the Economic Policy Institute in Washington, D.C., crunched data from the Bureau of Labor Statistics and found that blacks with the same level of education as whites have consistently lower employment levels. It doesn’t matter whether you compare high-school dropouts or workers with graduate degrees, whites are still more likely to have a job than blacks. Degrees be damned.

Academics have thrown plenty of other explanations at the problem: declining wages, the embrace of crime as a way of life, increased competition with immigrants. None of them have stuck. How could they? In recent decades, the wage gap has narrowed, crime rates have plummeted, and there's scant evidence to suggest immigrants are stealing jobs that would otherwise be filled by African Americans.

Indeed, many top researchers in this field, including several I interviewed, are left scratching their heads when trying to explain why that staggering jobless gap between blacks and white won't budge. "I don't know if there's anybody out there who can tell you why that ratio stays at two to one," Darity says. "It's a statistical regularity that we don't have an explanation for."

Behind Bars, the Invisible Unemployed

So what keeps blacks from cutting into those employment figures? Among the theories, one that deserves special attention points to the high incarceration rate among blacks -- and especially black men.

In 2009, 7.2 million Americans -- or 3.1% of all adults -- were under the jurisdiction of the U.S. corrections system, including 1.6 million Americans incarcerated in a state or federal prison. Of that population, nearly 40% percent were black, even though blacks make up only 13% percent of the American population. Blacks were six times as likely to be in prison as whites, and three times as likely as Hispanics. For some perspective, consider what author of The New Jim Crow Michelle Alexander wrote last year: "There are more African Americans under correctional control today -- in prison or jail, on probation or parole -- than were enslaved in 1850, a decade before the Civil War began."

Incarceration amounts to a double whammy when it comes to African-American unemployment. Rarely mentioned in the usual drumbeat of media reports on jobs is the fact that the Labor Department doesn't include prison populations in its official unemployment statistics. This automatically shrinks the pool of blacks capable of working and in the process lowers the black jobless rate.

In the mid-1990s, academics Bruce Western and Becky Pettit discovered that the American prison population lowered the jobless rate for black men by five percentage points, and for young black men by eight percentage points. (Of course, this applies to whites, Asians, and Hispanics as well, but the figures are particularly striking given the over-representation of blacks in the prison population.)

Even that vast incarcerated population pales, however, in comparison to the number of ex-cons who have rejoined the world beyond the prison walls. In 2008, there were 12 million to 14 million ex-offenders in the U.S. old enough to work, according to the Center for Economic and Policy Research (CEPR). So many ex-cons represent a serious drag on our economy, according to CEPR, sucking from it $57 billion to $65 billion in output.

Of course, such research tells us how much, not why -- as in, why are ex-cons so much more likely to be out of work? For an answer, it’s necessary to turn to an eye-opening and, in some circles, controversial field of study that may offer the best explanation for the 60-year scandal of black unemployment.

Twice as Hard, Half as Far

In 2001, a pair of black men and a pair of white men went hunting for work in Milwaukee, Wisconsin. Each was 23 years old, a local college student, bright and articulate. They looked alike and dressed alike, had identical educational backgrounds and remarkably similar past work experience. From June to December, they combed the Sunday classified pages in the Milwaukee Journal Sentinel and searched a state-run job site called "Jobnet," applying forthe same entry-level jobs as waiters, delivery-truck drivers, cooks, and cashiers. There was one obvious difference in each pair:one man was a former criminal and the other was not.

If this sounds like an experiment, that's because it was. Watching the explosive growth of the criminal justice system, fueled largely by ill-conceived "tough on crime" policies, sociologist Devah Pager took a novel approach to how prison affected ever growing numbers of Americans after they'd done their time -- a process all but ignored by politicians and the judicial system.

So Pager sent those two young black men and two young white men out into the world to apply for perfectly real jobs. Then she recorded who got callbacks and who didn't. She soon discovered that a criminal history caused a massive drop-off in employer responses -- not entirely surprising. But when Pager started separating out black applicants from white ones, she stumbled across the real news in her study, a discovery that shook our understanding of racial inequality and jobs to the core.

Pager's white applicant without a criminal record had a 34% callback rate. That promptly sunk to 17% for her white applicant with a criminal record. The figures for black applicants were 14% and 5%. And yes, you read that right: in Pager's experiment, white job applicants with a criminal history got more callbacks than black applicants without one. "I expected to find an effect with a criminal record and some with race," Pager says. "I certainly was not expecting that result, and it was quite a surprise."

Pager ran a larger version of this experiment in New York City in 2004, sending teams of young, educated, and identically credentialed men out into the Big Apple's sprawling market for entry-level jobs -- once again, with one applicant posing as an ex-con, the other with a clean record. (As she did in Milwaukee, Pager had the teams alternate who posed as the ex-con.) The results? Again Pager's African-American applicants received fewer callbacks and job offers than the whites. The disparity was particularly striking for ex-criminals: a drop off of 9 percentage points for whites, but 15 percentage points for blacks. "Employers already reluctant to hire blacks,” Pager wrote, “appear particularly wary of blacks with known criminal histories."

Other research has supported her findings. A 2001-2002 field experiment by academics from the University of Chicago and the Massachusetts Institute of Technology, for example, uncovered a sizable gap in employer callbacks for job applicants with white-sounding names (Emily and Greg) versus black-sounding names (Lakisha and Jamal). They also found that the benefits of a better resume were 30% greater for whites than blacks.

These findings proved a powerful antidote to the growing notion, mostly in conservative circles, that discrimination was an illusion and racism long eradicated. In The Content of Our Character (1991),Shelby Steele argued that racial discrimination no longer held black men or women back from the jobs they wanted; the problem was in their heads. Dinesh D'Souza, a first-generation immigrant of Indian descent, publishedThe End of Racism in 1995, similarly claiming racial discrimination had little to do with the plight of black America.

Not so, insist Pager, Darity, Harvard's Bruce Western, and other academics using real data with an unavoidable message: racism is alive and well. It leads to endemic, deeply embedded patterns of discrimination whose harmful impact has barely changed in 60 years. And it cannot be ignored. As the old African-American adage puts it, "You've got to work twice as hard to get half as far as a black person in white America."

Is There a Solution for Black America?

Tracing black unemployment in America since World War II, there are two moments when, briefly, the gap between black and white joblessness narrowed ever so slightly -- in the 1940s and again in the late 1960s and early 1970s. For example in 1970, unemployment was at 5.8% for blacks and 3.3% for whites, a sizeable gap but significantly better than what followed in the Reagan era. Those are moments worth revisiting, if only to understand what began to go right.

According to University of Chicago professors William Sites and Virginia Parks, those periods were marked by a flurry of civil rights and anti-discrimination activity on the federal level. A series of actions ranging from the creation of the Fair Employment Practice Committee in 1941 to the passage of the Civil Rights Act of 1964 (which mandated the Equal Employment Opportunity Commission), the Voting Rights Act of 1965, and the Equal Employment Opportunity Act of 1972, write Sites and Parks, had "dramatic impacts on employment discrimination."

Today, in terrible times, with the possibility of social legislation off the table in Washington, the question remains: What, if anything, can be done to close the jobless gap between blacks and whites? When I asked Devah Pager, she called this the "million-dollar question." This form of discrimination, she pointed out, is especially difficult to deal with. As she noted in 2005, many employers who discriminate don't even realize they're doing so; they're just going with "gut feelings." "It's not that these employers have decided that they are not going to hire workers from a particular group," Pager told me.

What won't work is relying on discrimination watchdogs to crack down more often. The way federal anti-discrimination law works, it's up to the person who was discriminated against to raise an alarm. As Duke's William Darity points out, that’s a near impossibility for a job applicant who must convincingly read the mind of a person he or she doesn’t know. Worse than that, the applicant who wants to lodge charges of discrimination also has to prove that the discrimination was intentional, which, as Pager’s experiments make clear, is no small feat. Under the circumstances, as Darity told me, perhaps no one should be surprised to discover that blacks "grossly underreport their exposure to discrimination and whites grossly overreport it."

Of course, fixing a problem first requires acknowledging it -- something the nation has yet to do, says the Economic Policy Institute's Algernon Austin. To put blacks back to work, lawmakers should invest federal money directly in job creation, especially for black workers. Other avenues for putting people back to work, like a payroll tax credit won't do the trick. "We've spent billions in trying to build jobs overseas" in war zones, Austin told me. "But if we invested that money here in our cities, we wouldn't have this racial gap."

But how likely is that at a moment when, in a Washington gripped by paralysis, any discussion of spending in Washington begins and ends at how much to cut? The painful reality of permanent crisis for black workers is here to stay. That’s how it seems to blacks in D.C., especially those who live east of the river. In April, another group of protesters took to the 11th Street Bridge to demand more D.C. hires, and the following month, the group D.C. Jobs or Else took their complaints to City Hall. But progress is slow. "We're being pushed out economically," said William Alston El, a 63-year-old unemployed resident who grew up in D.C. "They say it’s not racism, but the name of the game is they have the money. You can’t live [in] a place if you can’t pay the rent.”

June 28, 2011

Why is unemployment so high? Simply put it's because corporations and businesses can produce a surfeit of consumer goods without the need for additional human labor. Since 125,000 new faces enter the work force every month, there should be new jobs created for these people if they are to make a living since most people, but not all, make their living through work. Some, however, the rentier class, make their living from stocks, rent, dividends and interest, but not very many. But the American and even the world - since we're in a global economy - production machine doesn't need additional workers; it needs more consumers. Everything can be produced with a diminishing number of workers. Why? Consider automation, robotization, computerization. In short today machines do most of the work. You only have to watch one of those shows on the Science Channel to appreciate this: "How Stuff is Made." You see that most industrial processes have been completely automated.

Back in the old days production was very labor intensive. Stuff was made by hand. Machines were very primitive or non-existent depending how far you go back. The land was tilled and crops planted by hand whereas today huge tractors and automated farm machinery mean that one man can do the work that was done by hundreds a hundred years ago. What little labor is needed in today's world can easily be outsourced to wherever labor is cheapest. We have gone from an economy which was very labor intensive, one that required a lot of hands for the production of goods, to one that requires very little labor to keep the machines and robots humming. And the process of mechanizing and automating production processes continues. Robots are getting ever smarter.

So where does that leave the average person who is trying to make a living? Not in a very good position with the current economic model. It essentially leaves him or her in the position of a serf begging for a job and competing with thousands of others for work. The serfs were even better off because at least their labor was needed. Today's industrial reserve army is not really needed by the capitalists and corporatists who control the economy. That means two things: 1) the value of labor is depreciated because so much of it is available and unneeded and 2) there is a growing percentage of the population that must either be sustained by some form of welfare or unemployment compensation or cast to the wolves to beg, borrow and steal.

What is needed is a new economic paradigm which recognizes that very little labor is needed and machines can do most of the work. What would that new economic model look like? There would need to be a much larger leisure class than now exists. The wealthy are very few in number as a percentage of the population as a whole. They don't have to work because they have a steady stream of income which represents a return on their assets. Ownership of real estate produces a return in the form of rent. Ownership of stock produces a return in the form of dividends. Interest income is at an all time low because interest rates are so low, but when they go up again, people will be able to make a living if they have enough money in money market, CD and savings accounts. Unfortunately the distribution of wealth is way out of whack. Those in a position of being able to make a living off of so-called unearned income are very few. Those in the position that their only recourse is to make a living from their labor are the vast majority. What is needed is to turn this situation around so that the vast majority can make a living off of return on assets and only a small minority, whose labor is actually necessary for the functioning of society, will be necessary to make money from work. Or the work could be spread around so that everyone might work a few hours a week and make their living mainly on the return on assets or acquired wealth and a small portion of their living off their labor.

This is effectively what advanced societies (not including the US) have done. A large portion of the wealth of the society is held publicly. This does not preclude the private acquisition of wealth, but insures that the distribution of wealth is not as skewed as it is in the US. This makes it possible for the less fortunate, the less able and the unemployed to make a living as a return on public wealth. The fortunate do not need public assistance, but the unfortunate do. Public wealth can provide for free health care, free education and free unemployment compensation among other things. By taxing the rich, money is redistributed to the poor so that the processes of production and consumption can continue. Or public wealth in the form of natural resources can be sold and the profits divided evenly among the people. Many countries use their oil assets as a form of public wealth. Otherwise, all the money ends up in the hands of the wealthy and production stops because the vast majority of people have no money to consume. When money is redistributed or recycled from rich to poor, the production and consumption processes can hum merrily along. So taking money from the rich in the form of taxation and redistributing it to the poor is very important for the healthy functioning of society especially in advanced societies where most of the work is done by robots and human labor is increasingly unnecessary.

So all this banter about the rich being job creators is a bunch of hooey. The rich are not job creators; they are robot acquirerers and job destroyers. They make capital investments of a nonhuman variety because they are more efficient in the production process than are humans. For one thing machines can whiz and hum 24 hours a day. Humans need their rest. Safety standards for machines are more lax than they are for humans. Maintenance is simpler. Machines don't get sick or disgruntled. All in all if a capitalist can replace a human with a machine, he will do it. Capital investment in machines is more desirable than an investment in human capital.

So what does that say about the value of education? Essentially a college education is of diminishing value. Sure some will chase the fantasy of more and more education in order to better compete for fewer and fewer jobs. In the long run the student loan debt required to obtain a credentialization in some field will not be worth it. Since more and more people will be left to their own devices instead of hired, the sensible thing is to prepare for a life of self-employment. Instead of preparing to participate in the global economy with its attendant risks of outsourcing and downsizing, prepare to participate in the local economy in a job from which you cannot be fired and which cannot be outsourced. A college education prepares one mainly to be a servant of a corporation. It shows that one was docile and compliant enough to follow years and years of instruction, sit in classrooms and take tests successfully. It shows the employer that a potential hiree has the requisite qualities of docility and compliability to make a good employee, one who won't make waves or criticize the corporation, one who will adopt the ethos and become enculturated in corporate values, one who, in other words, will sell his soul to the corporation.

Another way to fight back against the job destroyers (not creators) is to form cooperative work enterprises such as the Mondragon corporation which is wholly employee owned. The employee, in addition to acquiring a paycheck, acquires a share of the profits as well. So the worker becomes an owner and makes part of his living from a return on assets just like the wealthy do. Wealth, therefore, is more widely distributed and can be further distributed by reducing the work week, hiring more employees and distributing wealth even more widely.

In an age in which there is a diminishing need for human labor and most work in the production process is done increasingly by machines, the rational thing to do is to distribute the necessary work more widely (i.e. reduce unemployment), reduce the work week and create a situation where each individual makes a portion of their living off of acquired public wealth. In Norway, for instance, the old age pension system is entirely funded by profits from a publicly owned asset: oil. These profits then are invested conservatively so they will be available to future generations.

June 18, 2011

The silence is deafening. While the rest of the nation is heading back toward a double dip, Washington continues to obsess about future budget deficits. Why?

Republicans don’t want to do anything about jobs and wages. They’re so intent on unseating Obama they’d like the economy to remain in the dumps through Election Day. They also see the lousy economy as an opportunity to sell Americans their big lie that government spending is the culprit — and jobs will return if spending is cut and government shrinks.

Democrats, meanwhile, don’t want to admit the recovery has stalled.They worry such talk will further undermine consumer confidence or spook the bond market. They don’t want to head into the election year sounding downbeat. And they don’t think they have the votes for anything that will have much effect before Election Day anyway.

But there’s a third reason for Washington’s inaction. It’s not being talked about — which is itself evidence of the problem.

The unemployed are politically invisible. They don’t make major campaign donations. They don’t lobby Congress. There’s no National Association of Unemployed People.

Their ranks are filled with women who had been public employees, single mothers, minorities, young people trying to enter the labor force, and middle-aged men who have been out of work for longer than six months. You couldn’t find a collection of people with less political clout.

Women who had been teachers, public health professionals and social workers have been hit hard. These jobs continue to be slashed by state and local governments. Public schools alone accounted for nearly 40% of the nation’s total public sector job losses in the last year. From March 2010 to March 2011, women lost 214,000 public sector jobs, compared with a loss of 115,000 public jobs by men.

Unmarried mothers are having a particularly difficult time getting back jobs because their work was heavily concentrated in the retail, restaurant and hotel sectors. Many of these jobs disappeared when consumers reduced their discretionary spending, and they won’t come back in force until consumers start spending more again.

According to a new report by the California Budget Project, the recession erased more than half the jobs single mothers in California had gained from 1992 to 2002. The result has been a drop in the share of unmarried mothers in jobs, from 69.2% in 2007 to 58.8% in 2010. Unmarried mothers who still have jobs are working fewer hours per week than before.

Blacks also continue to be hard hit. Their unemployment rate here in California reached 20% this past March, up 5% from a year ago. That’s more than double their rate before the downturn. Some of this is because of the comparatively low education levels of many blacks, and their weak connections to the labor market. Some is due to employer discrimination. Blacks were among the last hired before the recession and therefore among the first to be let go in the downturn. That means they’ll be among the last hired as the economy recovers.

Many young people who have never been in the job market are unable to land a first job. Employers with a pick of applicants see no reason to hire someone without a track record, particularly those without much education. Unemployment among high school dropouts is hovering around 30%. Even recent college graduates are having a much harder time than usual finding a job. Many are settling for jobs that don’t ordinarily require college degrees, which pushes those with less education even further back in the line.

Older workers who have lost their jobs are at the greatest risk of continued unemployment. Employers assume they aren’t as qualified or reliable as those who are younger and have been working more recently. According to research by the Urban Institute, once you’re laid off, your chance of finding another job within a year is 36% if you’re under the age of 34. But your odds drop the older you get. If you’re jobless and in your 50s, your chance of landing another job within the year is only 24%. Over 62, you’ve got only an 18% chance.

What do these jobless have in common? They lack the political connections and organizations to get the ears of politicians, and demand policies to spur job growth.

June 05, 2011

Obama seems to be counting on the fact that the economy will recover on its own after the initial stimulus package. It's starting to look like this was a bad bet. The Republicans of course have their job creation plan in place: lower taxes especially on the rich, less government spending and more deregulation or, in other words, the continuation of the transfer of wealth from the poor and middle class to the rich. However, this is precisely what has ruined the economy. As Robert Reich, Bernie Sanders, Paul Krugman and others have been saying repeatedly, the government has to spend more to create jobs and raise the money to do so by a variety of mechanisms like a financial transaction tax, doing away with subsidies for oil and agriculture, closing tax loopholes for corporations, raising taxes on millionaires and billionaires etc. Obama is in the weak position of not having an ideological counter to the Republican ideology. The Democrats need to develop an ideological position based on Keynesian economics to counter the Republicans. Obama's "Republican lite" philosophy will probably result in his losing the next election if the economy continues to sputter and stagnate. His position seems to be the Republican position only not quite as severe. What is needed is a complete repudiation of trickle down economics, union busting, the "small government" mantra, and the wealthy as "job creators." The Democrats need an ideological consistency to counter the Republicans who are extremely ideologically consistent.

Most of the jobs being created are temp jobs and lousy jobs at less than a living wage. The Democrats are not addressing this and they need to. The Democrats need to state loudly and clearly that the government needs to be the job creator of last resort. If private enterprise cannot create the jobs to provide for a full employment economy, then government must step in and fund infrastructure repair projects and even a WPA style work program. We need to get over the notion that the only legitimate government job creation program is in the military.

Obama's Administration and the Republicans are either brain mute or unwilling (out of fear of increasing America's indebtedness now with CONSTRUCTIVE PUBLIC DEBT financed investments ) to recognize the deeply structural character of our nation's declining rate of job generation shown in Frank's 30 year trend summary (The U.S. Ongoing Structural Unemployment Calamity).

The 50,000 job generation in May doesn't surprise us. In the 80s and 90s decades about 36-38 million jobs were created (averaging 18-20 million per decade: see Advance and Rutgers study). In the first decade of the 21st century, depending on which study numbers one uses, U.S. job generation was either a shockingly negative -0.4 million up to-2.1 million including labor force growth.

To summarize again this disastrous trend based on Advance & Rutgers 1982-2009 and BLS 2010-11 data:

ANNUAL AVE. JOB GROWTHTOTAL

Nov.1982-July 1990 Expansion 2,401,800 18.4 Mil.

Mar. 1991-Mar. 2001 Expansion 2,150,000 21.5 Mil.

Nov. 2001-Dec. 2007 Expansion 1,020,550 6.2 Mil.

Jan. 2008-Dec.2009 RECESSION - 4,600,000 (a) -9.2 Mil. (a)

Jan.2010- Dec. 2010 RECOVERY 850,000 0.9 Mil.

Jan. 2011- May 2100 RECOVERY 700,000 0.7 Mil.

(a) Includes unfulfilled job need of 1.7 million to meet labor force growth.

As everyone has learned a few thousand times over by now, we have 14 million officially unemployed and another 8-10 million underemployed (the latter at below-subsistence wage levels). As was reported in a recent writing, this overall situation is far worse than that of the better performing, mature European countries (excepting the high jobless levels in Spain, Ireland, Greece and Portugal).

AUSTERITY (get rid of waste), REFORM (Medicare, Soc. Security, Defense Spending, Tax System/Avoidance) and INVEST (in high-return projects, training) to produce jobs should be Obama's no-holds-barred leadership call. We are on the path of being mired in a long lasting economic malaise similar to Japan's experience during 1992-2002 -- where their debt as a % of GDP rose from 62% to 174% in 2004 and even higher now. Japan covered their explosive annual debt cost with exceptionally strong net export surpluses up to 2008. Now, with sharply deteriorating net export balances, their high debt level is becoming an unquestionably dangerous financial burden.

If we migrate to a Japan 10 year stagnant-type malaise, we will be in BIG financial trouble because we have no trade surpluses, only enormous annual trade deficits simultaneously with a mountain of public debt escalated in the Great Recession bubble of Bush's Presidency and by the government's costly rescue efforts of selected financial institutions.

As repeated many times, our economic growth model of extreme dependence on CONSUMPTION (70% of GDP vs. 60% in Europe) with almost Zero Savings (vs. 10-12% in Europe) and net export deficits of $45-60 billion a month, along with low PUBLIC and PRIVATE Investments (vs. higher infrastructure and R&D investment levels in Europe) is NOT SUSTAINABLE. European countries, like Holland, Germany and others, realize that Public investment spending, joint private-public ventures and sensible, affordable military spending (+-1.7% of GDP vs. +-5.5% in U.S.) much more significantly and effectively increase GDP, jobs, incomes and tax revenues in the short and long term. All this means that we need new ideas to get our social-economic model structurally as well as fiscally balanced to improve societal well-being ... to stop the destruction of human capital through impoverishment of the middle-class.

The Democrats need to fine tune their ideological stance and confront the Republican ideology head on. They can't just be pragmatic. Pragmatism looks a lot like wishy-washiness when confronted by an aggressive, confrontational ideology like the Republicans espouse. And Obama cannot simply cross his fingers and hope that the "experts" are right when they say that the American economy will just recover by itself and on its own without any further efforts on his part.

June 04, 2011

This is a classic "small d" democratic moment. The economy is in deep trouble -- immediate and long term. Washington is oblivious, compromised by moneyed interests, knotted by ideological divides. It will take an angry and aroused citizens' movement to demand the debate worthy of a great nation in deep trouble.

The dismal jobs numbers only punctuate the reality of an economy that isn't producing sufficient jobs. The crisis is both immediate and long-term. The so-called recovery hasn't begun to recover the jobs lost in the Great Recession. 25 million people are in need of full time work. Home values continue to fall. 25 percent of 17- to 25-year-old high school graduates not in college are out of work. Much of a generation is at risk.

The immediate is only an expression of more profound problems. The middle class was losing ground before the Great Recession. Good jobs are being shipped abroad. Wages aren't keeping up with the costs of basics. The broad middle class that made America exceptional is disappearing. The American dream seems ever more like a nostalgic memory. The nation continues to run unsustainable trade deficits, and must dig out of a mountain of debt -- both public and private. For the first time, an increasing majority of Americans fear their kids won't fare as well as they have.

We need action to put people to work. But short term fixes aren't enough. Americans are looking for a serious strategy that will get us out of the mess we are in.

The Beltway Bloviating

But inside the beltway, Washington is clueless. It's the only major city in the country where housing prices are going up. A flood of corporate lobby money insures that the tables are full at the high end restaurants. Entrenched corporate interests buy a lot more than lunches with their dough. They block vital reforms on health care, energy, trade, Wall Street. They feed off taxpayers, protecting their subsidies and tax dodges, avoiding taxes, while deficits rise and essential programs like nutrition for infants get cut.

The politicians prefer posturing to bold action, "message" and "spin" to leadership. Republicans even with the majority in the House are focused on obstruction. They vote for more tax cuts for the wealthy and corporations, paid for by ending Medicare and Medicaid, hiking costs for those least able to pay -- seniors, the disabled, the dying. They vow to blow up the economy if they can't get a deal on trillions in domestic spending cuts, accompanied by more tax breaks for the wealthy. They're lining their campaign coffers carrying water for the big banks against even minimal reforms.

The adult Republican presidential candidates like Mitt Romney claim they can get the economy going and create jobs. But they only recycle old and failed nostrums. More tax cuts for corporations who are already sitting on over a trillion in cash waiting for customers. More tax cuts for the wealthiest, who already have the most concentrated income and wealth since the eve of the Great Depression. More corporate trade deals that ship goods jobs abroad, undermine wages at home, and force up to borrow over a billion a day from abroad to balance the deficits. Less regulation when we haven't recovered from the catastrophe caused by the excesses of deregulated Wall Street. They pretend they can balance the budget and put people to work by cutting domestic spending, cutting taxes, increasing spending on the military, and not dismantling basic promises like Medicare and Social Security. They and everyone else knows that is a lie.

The White House offers no clear way out. The president wants to hail the successes of an economy that isn't working for most people. Yes, his policies saved us from free fall -- thanks, but we're worried about what we face, not where we've been. He sensibly calls for "winning the future" -- making investments in areas like education, innovation and infrastructure. But he's locked himself into austerity, focused on cuts, and offering no big vision of how we move forward. He's more sensible than the tea party zealots, but remains unwilling to tell Americans what needs to be done and that fight for it.

The Democrats in the Senate are a babble, too divided to deliver a message. The House Democrats are cowed by the losses in 2010, too worried about being accused of being "big spenders" to lay out a course to get the economy going and put people to work.

And few seem ready to put out a strategy that necessarily will take on the interests that are strangling the dream. A national trade strategy that isn't controlled by multinationals. Affordable health care not catering to private insurance and drug companies. Fair taxes that shut down the tax havens, the dodges, the obscene subsidies that drain our resources. An investment strategy that generates vital public and private investment, not more Wall Street speculation, or CEO incentives for laying off workers and plundering their own companies.

It will take a popular uprising to get Washington even to begin to focus seriously on jobs and the economy. We've seen this before. There was a bipartisan consensus on the Iraq War until a growing movement forced first Democrats and then the Bush White House to face reality. The Washington establishment was drunk on slashing Social Security and Medicare to address deficits, and Republicans embraced gutting Medicare, until popular disapproval expressed both in the polls and in the special election in upstate New York sobered them up a bit. The anger expressed by the Tea Party minority still has Republicans in Washington reeling.

Now we need the people to speak again. This time for the American majority. We aren't buying the old conservative elixirs. The New Dem-Republican lite embrace of half measures and conservative cross dressing isn't acceptable.

Washington has to hear a clear message. We elected you to get this economy going, not gut Medicare. We want to know how you will create jobs. We don't want to be served the old tired babble. We know we can't simply cut our way to prosperity. We know we need a major change in our global strategy. We know we've got to make investments vital to the future -- in education and in innovation. We know this economy needs major reforms. Anyone not willing to challenge the corporate interests that are strangling change isn't serious. We know it is hard to focus on creating jobs when deficits are this high. We know we'll have to sacrifice, but we're not broke -- we don't have to break promises to our kids or our parents. And don't ask the victims of this economy to sacrifice when those making out like bandits are given a pass. We know once the economy is moving, taxes have to go up and spending has to be brought under control. So stop the nonsense of no tax hikes. Tell us what you will cut and why. Don't pretend choices don't have to be made.

So lay it out. How do you put people to work, change our economic strategy so we begin once more to make things in America and create good jobs, not poverty wage jobs? How does that relate to getting our books in order and our priorities straight? Give us a debate worthy of a great nation in deep trouble.

In August, after Washington reaches an inevitable deal on lifting the debt limit after weeks of posturing and bluster, of an idiotic debate focused on what to cut rather than how to get the economy going, legislators will return home for recess. They need to hear from us.

May 28, 2011

In his latest speeches on the Middle East, President Obama, both at the State Department and at the G8 meeting in France, has pledged billions of dollars in economic aid to Middle Eastern countries, drawing a direct connection between the unrest and demonstrations that brought down the dictators in Tunisia and Egypt, and the joblessness and hopelessness felt by the young people in those two countries.

His adviser on international economics, David Lipton, has been more specific, saying that, “We believe that these two pillars go hand in hand. Without economic modernization, it will be hard for governments trying to democratize to show people that democracy delivers.”

Unemployment in Egypt among young men and women is about 30%. In Tunisia, it is over 40%. The White House claims that with figures like that, the future for democracy in those countries is tenuous.

But wait a minute. What about the US? Unemployment and underemployment here is still up around 20% overall, and it is much higher among young people. Black youth unemployment fell so far in 2011 to an official rate of 44% from 50% last year (because so many young workers just gave up trying to find work)! Among Latino youth, the official unemployment rate is stuck at around 30%. Overall, youth unemployment, according to the official Labor Department figures, is 20%, but remember, the official rate does not count those who are working part time who want full-time work, and does not count those who have given up looking for work. Among young people, it may be that many who work part-time (those who live at home or who are in school or college) actually are not looking for full-time work, so that upward adjustment may not be as great as for older workers, but at the same time, there are certainly more young people who give up looking for jobs than is the case with older workers who have families to support. In any event, it is clear that all these youth unemployment figures are actually too low by a significant amount.

If the official rate of unemployment for all Americans of 9% is actually less than half of the actual rate of 20%, then even if we took a conservative estimate, simply eliminating the adjustment of those working part-time who want full-time work from the youth unemployment figure, and just keeping the adjustment for those who have dropped out of the labor force (stopped looking for work) because it is fruitless, we would still see actual unemployment figures for young people in the US at staggering Egypt-like levels: 30% for all young people, 45% for young Latinos, and as high as 66% for black youth!

So why is the president so concerned about providing economic support to boost jobs in countries like Tunisia and Egypt, in order to “support democracy,” while in here in the US, he has basically thrown in the towel on job creation efforts, and is just talking about cutting the deficit--a Republican theme?

Cutting the deficit, even as economists are increasingly warning that the so-called “recovery” is sputtering, is a recipe for even worse unemployment.

The answer can be found by looking at the way the young have reacted to joblessness in Egypt and Tunisia on the one hand, and in the US on the other.

In Egypt and Tunisia, they took to the streets and stood down police and soldiers, ultimately bringing down their governments.

Here in the US, young people, like their parents, are largely quiescent. Their reaction to the frustrations of joblessness tend to be either self-destructive (drugs and alcohol) or anti-social (gang activity or crime).

If they were to band together and take over city squares to demand action by government to give them jobs, to provide them with access to college funding, etc., they would get the same kind of attention and help from local and state governments and from the White House and Congress that Egyptian and Tunisian youth are getting from the G8 countries.

Sure, they’d have to face down police armed with tear gas and batons, just like their compatriots in Tunisia and Egypt had to do, but once aroused, motivated and organized, young people have the stamina and courage to do that.

What is lacking is any real effort to organize these frustrated and angry young people, and to get them out into the street. The traditional groups that would have done this in the past--the labor movement, civil rights organizations, and political groups on the left--have been somehow neutered. Their focus, such as it is, is on now on elections, on recall campaigns, and on the coming 2012 presidential contest. It is not on organizing unemployed young people.

Expecting the White House to act on this crisis of long-term joblessness and diminished expectations for the future among young workers is foolish. The Obama administration knows what the problem is. It just doesn’t care.

As an “unnamed White House official” put it at a press briefing recently, “I think it’s important to note that the political movements of nonviolent protests that we’ve seen are rooted in part in a lack of opportunity in the region. You have very large populations of young people, many of whom -- too many of whom cannot find a job. You have a history not just of political rights being restricted but of economic corruption that has also frustrated opportunity.

“So we think it’s important to note that some of the protests in the region are deeply rooted in a lack of individual opportunity and economic growth, as well as a suppression of political rights.

“We also know from our study of the past that successful transitions to democracy depend in part on strong foundations for prosperity, and that reinforcing economic growth is an important way of reinforcing a democratic transition.”

That analysis clearly applies equally to the impoverished inner cities of the US, and indeed increasingly to the entire population of young Americans, who are seeing national policies, state policies and corporate lobbying -- all focused on cutting taxes and boosting corporate profits -- rob them of their futures.

May 16, 2011

The huge crowd of a couple thousand, as viewed from the stage. The pink flags represent pink slips received by over 4100 teachers from Southern California. (All photos by Frank Gormlie.)

Since Andy Cohen covered the meat and potatoes of the teachers’ “State of Emergency” rally already, I wanted to share some other thoughts about the event and display a sampling of the numerous photos I took yesterday, Friday the 13th while at the Embarcadero in downtown San Diego.

Crowd bound for the rally.

When I heard that the rally was going to be at the Embarcadero, I told Patty that parking would be horrendous downtown and next to impossible, so we agreed to take the trolley from Lemon Grove. She wrapped up our banner, we gathered our camera and notepad, and we hopped the 3:44 pm trolley (although by time it got to us, it was 3:50). After grabbing our seats, we looked around and saw several women wearing red T-shirts that spelled out “STOP” – Students and Teachers Our Priority. And during the ride downtown, we heard several guys who were standing up having quite an intellectual conversation – even hearing the name “Chomsky” come bouncing out. Are these teachers? we wondered on their way to the rally.

Sure enough, once the trolley pulled up to the Seaport Marina station, the entire car stood up and got off. And everyone began heading to the Embarcadero. This was great! I thought. An entire trolley from east county going to the same rally. As we crossed the tracks and Harbor Drive, we were a march in and of ourselves.

The "counter-demonstration" just a few minutes before they were to begin. The woman in red is the Koch brothers' rep.

As our little parade moved into the park, I took a right turn and headed over to the counter-rally. I had heard the Koch brothers’ Americans for Prosperity, the Young Republicans, and some tea party types were going to be holding a nearby demonstration against us and the teachers. A protest of the protest. As I approached this sideshow, I noticed almost more video cameras than people. Once in their midst, I did count twelve actual counter-demonstrators. A red-suited woman was bouncing around, saying she represented Americans for Prosperity. I asked her when her rally was going to begin. At 5 she said. One guy asked who I was – I had an OB Rag T-shirt on and was taking photos, and he showed me his sign. Later, I heard that their gig attracted somewhere between several dozen (U-T estimate) and about a hundred (estimate from a reporter).

Moving away from the tea partiers, I approached the main event and witnessed streams of folks – many in red shirts – pouring into the green east end of the Embarcadero. On the way there were small tables with mountains of water bottles and snacks being given away. Nice touch, I thought.

I also noticed there was about a dozen Harbor Patrol and City police in the vicinity. Just then, a police lieutenant walked up to me, and profusely thanked me for providing “the only information out there” about this event. That was kind of weird but I politely thanked him for that. And when I reunited with Patty who was holding our banner, she told me that one of the rally organizers had told her that the police were asking about us. “OB Rag – who are they?” It’s always good to be noticed.

Patty found a small hill just west of the main stage and planted herself and the banner. I went about taking photos and attempted to do a head count. This was very difficult as people were still moving into the park and rally area. I gave up after counting 1500.

There was a steel drum trio pounding out music, while the 4100 tiny pink flags fluttered in the wind. Two dozen students held signs with large letters proclaiming their opposition to ed cuts standing toward the crowd. I climbed up on the stage to take some more crowd shots.

Bill Freeman, head of the San Diego teachers' union.

I found Bill Freeman, head of the teachers’ union. I asked him how many people were expected, and he said 3 thousand. I then asked him why the Embarcadero had been chosen as the rally point. He replied that if it had been up to him, he would have gone for a more public site, but that CTA had chosen this particular one.

Finding Patty once again atop her hill, most of the crowd in that area were sitting on the grass. I joined them for the duration. Some OBcians joined us as well and took their positions on the green along side us.

There were a hell of a lot of people at this event. Many wore red-shirts, some light-blue ones as well. “We are one” was a favorite slogan on many of them. Many teacher groups sat together and whenever their school was mentioned from the podium, they would let out a holler. This gathering should really send a message. It was a rare occasion that this many teachers from all over the counties of Southern California were coming together.

Once the speakers started, there much applause, although only a few chants. Teachers are great, I thought, but they sure are subdued, even the many younger ones who were there. I compared them with the more militant Labor Council rally we attended back in late February, in front of the County building. But still, it was a wonderful showing overall.

Our good friend Gregg Robinson was one of the last speakers. Gregg wrote for this blog when we first began, and is known for being a good speaker. And today’s performance was not disappointing. He by far gave the most fired up speech of the rally. “Don’t let anyone tell you there’s no money for education!” he yelled out from the stage to an appreciative audience.

Gregg Robinson - at podium with arms folded - waiting to speak.

As the rally broke up, we headed back to the trolley and got on it. Our car was loaded with participants from the event all the way back east to the hinterlands. Trolley regulars looking for seats in a usually empty early evening Friday car must have freaked out. I didn’t know there was a Padres game, they probably thought.

There is a state of emergency – in education – but not just in education. It’s all over. One way to look at it, is that it’s so bad, even teachers are rallying. Teachers up and down the state were heard this week. Over two dozen were even arrested up in Sacramento, including their state union president.

Teachers have to continue to reach out, and stand with their fellow public union colleagues. We must continue to develop a genuine community-labor coalition for San Diego, and this was one more step – a giant step – in that direction.

‘Mal-employment,' a term from the '70s, has surfaced again to haunt grads

CHICAGO — Tiffany Groene is waiting tables.

Erin Crites is making lattes and iced coffees.

And Anna Holcombe is buying and selling gold.

These three Chicago women share more than just scraping by with low-paying jobs: They all have master's degrees and are unable to find work in their specialty areas.

There's even a name for their situation. They are referred to as mal-employed, a term coined in the '70s for college graduates who could not find jobs that require a degree. Instead, they settle for low-skilled jobs.

Even in rosier economic times, people with college degrees sometimes can't find jobs in their fields. But their numbers and the trend show no sign of easing during the slow and bumpy recovery from the recession.

Nationwide, about 1.94 million graduates under age 30 were mal-employed between September and January, according to data compiled by Andrew Sum, director of the Center for Labor Market Studies at Northeastern University.

Sum said mal-employment has significantly increased in the past decade, making it the biggest challenge facing college graduates today. In 2000, Sum said, about 75 percent of college graduates held a job that required a college degree. Today that's closer to 60 percent.

Uphill struggle

Though the economy is growing and new jobs are being created, Sum said, those graduating in June are not likely to see major improvements. About 1.7 million students are projected to graduate this spring with a bachelor's degree and 687,000 with a master's, according to the U.S. Department of Education.

“We are doing a great disservice by not admitting how bad it is for young people (to get a job),” Sum said.

And the longer college graduates go without working in their field, the harder it is to land interviews for jobs where they would use their degrees.

“It's hard to convince people that what I am doing is relevant,” said Groene, 27, who has tended bar and waitressed during the two years she's looked for a job related to her master's degree in public administration.

In that time, she's had one offer in her field. It came in 2009 from Chicago Public Schools but disappeared before she could start, due to budget cuts. Desperate, she took a job as a bartender. She said she quit six months later, upset by the sexual advances of bar patrons.

With no income, she moved back to her father's house in Rockford, Ill. At times, she found it difficult to leave her bedroom because she felt depressed.

She said she wasn't used to not succeeding. An avid soccer player, Groene was drafted to go to college and drafted again to become an assistant coach at Columbus State University in Georgia, where she earned her master's degree.

“You feel so down,” Groene said.

With the support of her family, she ventured out again last month and took a job as a waitress in Chicago. She said it's the best job she's had in two years. She also slowed down her job search and is back in school pursuing a master's in education.

“I can't find anything anyway,” she said, adding that more schooling allows her to start from scratch.

Experts say Groene's situation is hardly unique. When everything else fails, graduates are more likely to go back for more education. Those with a bachelor's sign up for a master's, and so on. Some take a step back, either to look for new opportunities or retool their fields of interest.

Bill White, for example, is pursuing a second bachelor's degree. He looked for a job for about six months before graduating in December with a master's in public relations and advertising. Unable to land one, the 28-year-old has shifted his focus to mechanical engineering.

While college graduates are still more likely to land a job than those without degrees, the fact that so many are not finding jobs in their fields has raised questions about the payoff of a college education.

Since he got his bachelor's degree last May, Kirk Devezin II has worked full-time a little more than six months and has freelanced. He has never made more than the $10.36 an hour he earned as a barista at Starbucks when he was a student at Eastern Connecticut State University.

“I apply to jobs constantly, constantly, constantly,” he said.

He has interviewed for positions related to his communications degree, but lately, all the interviews have been for barista and cook jobs, and one at a carwash. Sensing that employers in low-wage industries might think he is overqualified, he has left his college degree off the applications.

“It just seems like it was just a big waste of time,” said Devezin, 24, who still lives in Connecticut. “And I'm $20,000 in debt.”

The numbers show that he's wrong — experts say earning a college degree is still the best way to avoid unemployment.

Smaller value, but still value

“The value of the degree is still there; it is just not returning as much in investment as it would a few years ago,” said Carl Van Horn, director of the John J. Heldrich Center for Workforce Development at Rutgers University.

In fact, those who land a job in their field do well, but those who are mal-employed earn just slightly more than high school graduates, according to Sum's research. For example, the mean wage for those mal-employed is $476 a week, while those with a job that requires a degree earn $761. By comparison, a high school graduate earns $433.

Erin Crites, 27, makes $10.55 an hour as a barista at a coffee shop in downtown Chicago. She is struggling to pay her bills and has considered cutting her health insurance — a situation she was hoping to avoid by earning a master's degree.

Crites graduated in June from Dell'Arte International, a theater school based in California. She sought a master's degree in ensemble-based physical theater, figuring that such a specialized degree would make it easier for her to land a job. But Crites graduated as schools cut back art programs and arts-based nonprofits struggled to secure grants.

“You can get as close as you can to work solely as an artist without a source of secondary income ... but it's almost impossible,” she said.

Still, Crites is determined to make it in her field. As long as she keeps her passion, she will find a way in, she said.

Though barely getting by, Crites is lucky. Nationwide, there were about 2 million unemployed people older than 25 with at least a bachelor's degree — nearly 1.3 million more than in March 2007, according to the U.S. Labor Department.

On a small plaza near the DePaul University College of Law, a group of students about to graduate were socializing when a reporter approached. Most said they didn't expect to land a law-related job. One student said he was told by a potential employer that there was no reason to hire him when the firm could hire an experienced lawyer for the same salary.

That situation is becoming more commonplace.

Anna Holcombe, who has a master's degree in public relations and advertising, said she's often competing for jobs against people who only have bachelor's degrees or are willing to work for free just to get their foot in the door.

“It's a struggle,” she said, adding that at age 31 she doesn't have the luxury of being able to work for free. She has responsibilities, including bills due at the end of the month.

Until she gets a position in her field, Holcombe is holding on to her job as a sales associate at a retail store. She got the job to pay bills while at school, never thinking it would be so difficult to let it go.

My research told me that, despite the strong job growth development during President Clinton’s term, the annual rate of job growth in the 1991-2001 economic expansion still showed a decline from prior job growth rates in the 80s and 70s. Thus, like our structural budgetary deficits, we have had structurally declining jobgrowth rates since the 80s, reaching a never-before experienced negative growth rate during the 2008-2009 Great-Recession.

In the 80s, 90s, and 2001-07 economic expansions, the rate of private-sector job growth fell to an average of 2.7%, 2.2%, and 0.9%,respectively – compared to annual average job growth rates above 3% in the 70s and 60s. Here’s a 30-year disturbing factual summary:

The average annual rate of increase in jobs fell steadily during the expansion periods of Reagan’s, Bush Sr.s’ and Clinton’s terms … and then tanked further in the weaker 2001-07 economic expansion of Bush Jr.s’ term.

Then came the severe 2008-09 economic crash causing the loss of over7.5 million jobs plus another job need of 1.7 milllion to meet labor force growth. The result? For the first time since the Great Depresssion, the U.S. had an absolute private-sector job loss over the decade … ± 1.7 million fewer jobs than whenthe decade started.

In effect,the first decade of the 21st century has rightly been called, “The Lost Employment Decade,”—where job-less economic growth became the modus vivendi. To understand the “Big Picture” of this job-less structural calamity, our nation created 35.5 million private sector jobs in the final two decades of the 20th century. During the first decade of the 21st century we lost more than 1.7 million jobs! These are ominous precedents reflecting the scale and structural character of job losses.

Since January 2010, we have seen approximately 1.5 million new jobs generated, including ± 650,000 net new jobs in Jan.- April of 2011. or about 160,000 a month – of which 125,000 jobs are required for the annual ± 1.5 million growth in the labor force. So we have a long way to go to bring unemployment down 8 million from current ± 14 million to ± 6 million or a 5% unemployment rate, excluding the 8-10 million underemployed. Many consecutive years of sustained job growth – as opposed to the job-less growth of the last decade – are needed to eliminate the employment deficit of ± 8 million … again, excluding the 8-10 million now underemployed.

It’s clear that structural obstacles to job development are much DEEPER and more sinister than both sides of the political spectrum recognize. The ugly phenomenon of outsourcing, robotisizing, automating, downsizing, downgrading jobs, eliminating low-skill jobs, etc. are all factors contributing to the permanent destruction of middle-class jobs at a faster clip than they can be replaced by creative, sustainable investments, industry-focused training, better education, etc.

So far in 2011, the average job generation performance of 160,000 comes closer to the 90s performance when economic expansion was much stronger and not limited by a hugely destructive financial-casino bubble. Assuming 250,000 net new jobs are created every month for the next 7-9 years, the 8 million lost jobs (excluding the 8-10 million underemployed) plus 1.5 milllion added jobs needed to cover the labor force growth will not be employed until at least 2018-20.

Last March 30th, the Bureau of Labor Statistics (BLS) reported some telling trend data entitled: “International Comparisons of Annual Labor ForceStatistics.” It further dramatizes just how shockingly deep the U.S. declining structural job generation and unemployment situation has become … for adults above 25 and for younger adults 20 to 24.

________________________________________________________

Table 1b:OVERALL COMPARATIVE UNEMPLOYMENT RATES

________________________________________________________

20002010 % Change

U.S. 4.0% 9.6% +140%

Canada 6.1% 5.2% - 15%

UK 5.5% 7.9% + 44%

France 8.6% 9.4% + 9%

Germany 7.8% 7.2% - 8%

Italy 10.2% 8.6% - 16%

Netherlands 3.1% 4.5% + 45%

Sweden 5.8% 8.3% + 43%

________________________________________________________

It’s clear that America has had by far the greatest increase in its overall unemployment rate in the last decade. A long process of significant destruction of manufacturing jobs between 1980 and 2000 has now also started to include the destruction of service jobs in the last decade.

________________________________________________________

Table 1c:UNEMPLOYMENT RATES FOR ADULTS 25 OR OLDER

________________________________________________________

20002010% Change

U.S. 3.0% 8.2% +173%

Canada 5.0% 5.9% + 18%

UK 4.2% 5.8% + 38%

France 7.8% 7.9% + 1%

Germany 7.7% 6.9% - 10%

Italy 8.0% 7.2% - 10%

Netherlands 2.5% 3.7% + 48%

Sweden 5.0% 5.9% + 18%

_____________________________________________________

America has had by far the greatest increase in its unemployment rate for those 25 or older. The Great Recession has caused vastly more serious unemployment problems in U.S. than in Europe. People with no high school, only high school, some college, or a college degree are all hurting.

The pervasively poor quality of pre-college education and practical, in-depth training programs continue to dim job prospects for U.S. young and middle-aged workers. Little wonder the Great Recession has hit poorly educated people extremely hard. David Autor of MIT points out that those between 24 and 34 are less likely to have a degree and to have completed college than their similar age-group in the UK, Denmark, France , the Netherlands. and Spain.

________________________________________________________

Table 1d:UNEMPLOYMENT RATES FOR YOUNG ADULTS 20 TO 24

________________________________________________________

20002010% Change

U.S. 7.2% 15.5% +115%

Canada 9.4% 10.7% + 14%

UK 9.7% 15.0% + 55%

France 16.0% 23.2% + 45%

Germany 8.9% 9.9% + 11%

Italy 25.5% 25.1% - 2%

Netherlands 3.9% 6.7% + 72%

Sweden 9.6% 20.3% +111%

________________________________________________________

These are truly disastrous unemployment segment-trends for the U.S. and UK, France, Italy, and (quite surprisingly) Sweden. When young people in such large numbers are failing to find work in a reasonable time frame, this leads to: intensified social-net cost problems and protections; greatly disproportionate job discrimination towards some ethnic groups; loss of skills forcing millions of Americans to accept minimum wage survival Wal-Mart or fast food jobs … fostering a race-to-the-bottom for both young adults 20-24 as well as for adults 25 or older.

And here come the Hoover Republicans recommending deeper cuts in government jobs, teachers, firemen, and policemen … even in training programs for the long-term unemployed, the less educated, the high school dropouts, the older-age discarded. Programs to get people back to work are underfunded and ineffective compared to those of the best performing countries in Europe, for example, like the Netherlands.

And here come the Hoover Republicans saying this is not the time to Invest, Cut Waste, Reform Social-Nets and wisely Raise Taxes. Rather, it is a time only to CUT All Spending (except Defense) and PRIVATIZE Social Nets (Medicare, Social Security), etc. Republican fiscal math is the same old “trickle-down fraud” on the American public, making the rich and powerful richer and more powerful at the expense of the middle-class – talking reform rather than reducing huge budget deficits and encouraging broad-based job growth. Without adequate, decent jobs for the middle class, tax revenues will decline, social costs and instability will escalate. Lower taxes for the rich and corporations – with already Low effective tax rates – will simply redistribute money to the Few and expand the flight of capital abroad for better returns causing further losses in tax revenues … insuring continuing high budget deficits. The Paul Ryans and their elitist anti-government paradigm discouraging public direct investing/investment incentives for education, worker retraining, upgrading infrastructure, achieving green energy independence will also insure prolongation of high budget deficits and unemployment. Result? Continued imbalance between income distribution and economic growth with more and more middle-class Americans numbering in the millions left behind.

In this regard, the Republican lie machine is in full display when one reads carefully some typically wily words recently spoken by the anti-government polemicist, Paul Ryan. According to him:

“The Democrats’ narrative story line is: if you go to the Republicans they’re going to feed you to the wolvesin a ‘dog-eat-dog society’(writer’s note: which is exactly what’s been happening the past 30 years of which 20 years were Republican administrations). This narrative of ‘sharedscarcity’ (writer’s note: Why not also ‘shared prosperity,’ i.e., a fair playing field and broad-based participation in society’sprogress and failures?) will be ‘trumped’ by theRepublican story line: we want to have growth. (writer’s note: Who doesn’t? What growth and whose growth is Ryan talking about? Middle-class wages in 80% of households have gone up 12% after inflation the last 30 years while income and wealth growth/concentration of top 1%, 5%, 10% has mushroomed ). We want an ‘upwardly mobile society.’(writer’s note: Who doesn’t? But what we have is a middle-class and state-by-state race-to-the-bottom dynamic of stagnant wages, bare-bones social services, and jobless growth – while the rich get richer).

Anyone claiming to understand such double-talk is hyping a “Market Government” free-for-all democracy over the people, by the people, for the people.” We’ve had quite a 30-year taste of this ultra-right ideological distortion of our nation’s founding governmental principles. Look where it has landed us! And still the Ryans march on embracing divisive social issues: cutting and privatizing Medicare, lowering taxes on wealthy, defending non-tax paying companies like the oil and banking industries, turning brain-dead on ideas for selective, sustainable future job-growth investments/incentives and taxes to pay for them.

Conclusion

So, the vicious deficit circles and societal inequities become self-perpetuating and selfulfilling … fed by this fiscal fantasy farce of cutting taxes, government jobs and spending, while destroying unions to solve deficits. Let’s face it. We have Lost the Way and Connection to our core egalitarian values. Cool, balanced, respectively open, creative minds are desperately needed to represent fairly and constructively the interests of ALL Americans.

It’s time we bloody WOKE UP to the sheerstructural magnitude of our nation’s 30 year declining job growth rates … and a middle-class race-to-the-bottom that is financially impoverishing 80% of family households and dangerously dividing our country into a democracy for the HAVES with TIDBITS for the HAVE NOTS.

May 08, 2011

From G.D.P. to private-sector payrolls, from business surveys to new claims for unemployment insurance, key economic indicators suggest that the recovery may be sputtering.

And it wasn’t much of a recovery to start with. Employment has risen from its low point, but it has grown no faster than the adult population. And the plight of the unemployed continues to worsen: more than six million Americans have been out of work for six months or longer, and more than four million have been jobless for more than a year.

It would be nice if someone in Washington actually cared.

It’s not as if our political class is feeling complacent. On the contrary, D.C. economic discourse is saturated with fear: fear of a debt crisis, of runaway inflation, of a disastrous plunge in the dollar. Scare stories are very much on politicians’ minds.

Yet none of these scare stories reflect anything that is actually happening, or is likely to happen. And while the threats are imaginary, fear of these imaginary threats has real consequences: an absence of any action to deal with the real crisis, the suffering now being experienced by millions of jobless Americans and their families.

What does Washington currently fear? Topping the list is fear that budget deficits will cause a fiscal crisis any day now. In fact, a number of people — like Erskine Bowles and Alan Simpson, the co-chairmen of President Obama’s debt commission — have settled on a specific time frame: terrible things will happen within two years unless we make drastic spending cuts.

I have no idea where that two-year deadline comes from. After all, what we do in the next couple of years hardly matters at all for U.S. solvency, which mainly depends on what we’ll do in the long run about Medicare and taxes. And, for what it’s worth, actual investors — people putting real money on the line — are notably unworried about any near-term fiscal crisis: the Treasury Department continues to have no trouble selling debt and remains able to borrow very cheaply, indicating high confidence on the part of investors that debts will be repaid in full.

Do the scare-mongers even believe their own stories? Maybe not. As Jonathan Chait of The New Republic notes, the politicians most given to apocalyptic rhetoric about the deficit are also utterly opposed to any tax increase; they argue that debt is destroying America, but they’d rather let that happen than accept even a dime of higher taxes. Yet the inconsistency and probable insincerity of their fear-mongering hasn’t stopped it from having a huge effect on policy debate.

The deficit isn’t the only unfounded fear. I’ve written before about misguided inflation fear, but, for now, let me focus on a new issue that has suddenly begun to loom large in opinion pieces and remarks on talk shows: fear of a disastrous plunge in the dollar. (Who sends out the memos telling people what to worry about, and why don’t I get them?)

What you would never know from all the agitated dollar discussion is that the recent dollar slide is actually tiny compared with big drops in the past, notably under the administration of George W. Bush and during Ronald Reagan’s second term. And you’d also never know that those earlier dollar slides, far from hurting the economy, were beneficial, because they helped U.S. manufacturing compete on world markets.

Which brings me back to the destructive effect of focusing on invisible monsters. For the clear and present danger to the American economy isn’t what some people imagine might happen one of these days, it’s what is actually happening now.

Unemployment isn’t just blighting the lives of millions, it’s undermining America’s future. The longer this goes on, the more workers will find it impossible ever to return to employment, the more young people will find their prospects destroyed because they can’t find a decent starting job. It may not create excited chatter on cable TV, but the unemployment crisis is real, and it’s eating away at our society.

Yet any action to help the unemployed is vetoed by the fear-mongers. Should we spend modest sums on job creation? No way, say the deficit hawks, who threaten us with the purely hypothetical wrath of financial markets, and, in fact, demand that we slash spending now now now — which might well send us back into recession. Should the Federal Reserve do more to promote expansion? No, say the inflation and dollar hawks, who have been wrong again and again but insist that this time their dire warnings about runaway prices and a plunging dollar really will be vindicated.

So we’re paying a heavy price for Washington’s obsession with phantom menaces. By looking for trouble in all the wrong places, our political class is preventing us from dealing with the real crisis: the millions of American men and women who can’t find work.

April 04, 2011

Millions 'underemployed,' group claims

by Mark Huffman

The nation's unemployment rate dipped slightly in March to 8.8 percent, as the economy added more than 200,000 jobs during the month.

People rely on food banks, like the Community Food and Outreach Center in Orlando, Fla. But despite the improvement, a new report says millions of Americans are struggling to make ends meet, and we're talking about people who have jobs. (Todd Anderson for The New York Times)

But despite the improvement, a new report says millions of Americans are struggling to make ends meet, and we're talking about people who have jobs.

A group called Wider Opportunities for Women (WOW) has developed a formula that suggests the average single worker needs to earn $30,012 a year - nearly twice the federal minimum wage - to cover basic expenses. Single parents require nearly twice the income ($57,756) to support two children, while dual-income households with children require $67,920.

A family of four earning $22,050 a year is living below the federal poverty line. And many, in fact, are. Data from the U.S. Census bureau found 14.3 percent of Americans in that category in 2009.

"Too few American families are living in economically secure households, with most workers unable to stretch their incomes over basic expenses and savings," said Joan Kuriansky, WOW's Executive Director. "The American Dream of working hard to support your family is being re-written by the growth of low-paying industries and rising expenses."

Inflation and deflation

In other words, the U.S. is struggling against both inflation and deflation at the same time. Prices of commodities like gasoline and food are rising rapidly. Salaries - at least those outside certain industries like financial services and health care - are going down.

The report suggests things won't change anytime soon. The report finds that jobs created in the coming years will not provide economic security wages to the majority of workers who do not have four-year college degrees.

March 27, 2011

Germany's economy is doing just fine while the US economy languishes. There are many reasons for this, but one that predominates is the Value Added Tax (VAT). At each stage in the production process, when a product or service changes hands, it is taxed at 19%. So if you're manufacturing a car, for example, when you buy a component like a transmission from another manufacturer, that manufacturer has to pay the VAT before that product can be sold to you. Some products and services like food and doctors pay a lower VAT.

The VAT must be paid on all imports in one fell swoop as they enter the country whereas the VAT was paid in stages by different business entities at each stage along the supply chain within the country. This tends to discourage imports, and make it more profitable to manufacture and sell (and thus provide jobs) within the country of Germany itself. Contrast this with America in which there is no tax on imports (thanks to free trade) so it is cheaper to manufacture abroad and import products into the US thus creating jobs abroad. The VAT acts as a tariff on imports and also provides a loopholeproof source of revenues for the government. In the US many major corporations like GE and Exxon Mobil, for example, pay no income tax even though they make tens of billions of dollars in profits. In fact many of them actually get tax refunds or subsidies! This process defunds the government, frays the safety net for the middle class and the poor and results in the budget being balanced, to the extent that it is, on the backs of the poor and middle class.

For German exports, the VAT is refunded thus encouraging exports at the expense of imports. No wonder Germany has a healthy export economy. This acts like a tariff in reverse. So imports are subjected to a 19% VAT at the border and exports are given a 19% refund at the border. American exports are given no such incentive. In short the US is letting foreign countries eat their lunch and running up their trade deficit in the process because of an antiquated approach to taxation which favors American multinationals while shortchanging American taxpayers.

Unknown to most Americans, the United States is losing the ability to compete in global trade because of the little known foreign Value-Added Tax (VAT).

Foreign governments use this tax against United States producers as a means to prevent the importation and consumption of U.S. goods, while providing incentives for their countries to export their goods to the U.S. The foreign VAT was a subsidy created after World War II to speed up beneficial other countries' recovery. However, it is still used today by 149 countries to exploit this advantageous position against American trade. We have not used it domestically to off set theirs as a benefit to ourselves.

The foreign VAT gives the companies of other nations and their exports the upper-hand by providing incentives in the form of rebates equal to the indirect tax on the exported product. For example, the VAT rate is 19 percent in Germany; therefore the Germans receive a 19 percent rebate from their government on each product exported to the U.S. This acts as a subsidy for a product while encouraging the exportation of products to the U.S. However, the VAT imposes a punishment on U.S. exports by placing a VAT equivalent to the Value Added Tax rate of the importing country. This means all U.S. exports that enter into Germany are taxed 19 percent on top of another 19 percent for the transportation fees of the goods into the country. The VAT destroys American industries’ ability to promote exports, while encouraging foreigners to sell their products to Americans – it must be amended or eliminated.

In 2001, European countries had a VAT rate of 19.2 percent. By 2005, 94 percent of U.S. exports received a VAT. In the same year, foreign governments received rebates of $239 billion from the tax while collecting $131 billion from U.S. producers of goods and services.

It is not surprising that the U.S. has become a nation promoting imports over exports under these unfair and harsh tax conditions. It can be seen why some companies choose to move overseas to produce their product abroad to avoid this monstrous tax and gain the advantage of it in some cases. Because of this detrimental tax, American firms cannot compete worldwide.

Numerous attempts have been made by Congress to offset the tax – in 1974 the Nixon administration was urged to negotiate the tax during the Tokyo Round of global trade talks – only to be ignored by the other countries.

In 1972 and 1984, Congress changed the tax system to exempt between 15 and 30 percent of an exporter’s income from U.S. taxes to offset the disadvantage of the VAT. The European Union (EU) complained to the World Trade Organization (WTO) in 1998, saying the U.S. tax exemption, acting as a tax subsidy, was a direct violation of the WTO agreement. In 1999 the WTO ruled in favor of the EU, giving the U.S. one year to change its tax exemption law or face penalties from the WTO.

Again in 2000, Americans enacted new tax legislation to offset the VAT, which resulted in yet more EU complaints and another WTO case. The WTO decided in favor of the EU, leading to a ruling in 2002 allowing the EU to impose retaliatory tariffs of $4 billion each year on U.S. imports. By this time 25 European nations enacted the VAT to usurp America’s ability to trade.

In 2004 Pres. Bush created new legislation again to offset the VAT. This again led to complaints from the EU – again filing a case with the WTO – arguing export subsidies were provided by the new legislation. In 2006 President Bush and Congress stopped enacting the tax provisions to U.S. exporters, demonstrating how the EU and WTO had successfully usurped the U.S. of its power to promote fair and free trade.

During the battle between the WTO and the U.S., all nations were provided full VAT privileges, usurping the U.S. of fair trade. The WTO and EU do not serve in the best interest of the U.S. They are acting to support and promote continuance of this debilitating tax.

The only way the WTO will allow us to offset the VAT is to have one of our own. We could feasibly do this if we were to lower our income tax. Until we do get a VAT of our own, our companies and our nation will continue to suffer against this unfair disadvantage.

While the US is straitjacketed by partisan bickering and paralyzed by insane trade policies, Germany and other countries are surging ahead with enlightened, rational thinking which gets translated into effective policies that keep the German government in a position of solvency and keep German factories humming. Meanwhile, the US engages in a race to the bottom encouraging the export not of products but of jobs and defunding the government by giving tax breaks to corporations and the rich. Another informative article is the following:

In a June 28, 2010, economist Ian Fletcher said “Germany, like the U.S., is nominally a free-trading country. The difference is that, while the U. S. genuinely believes in free trade, Germany quietly follows a contrary tradition that goes back to the 19th-century German economist Friedrich List … So despite Germany’s nominal policy of free trade, in reality a huge key to its trading success is a vast and half-hidden thicket of de facto non-tariff trade barriers.”

Fletcher quoted from a report by the Heritage Foundation: “Non-tariff barriers reflected in EU and German policy include agricultural and manufacturing subsidies, quotas, import restrictions and bans for some good and services, market access restrictions in some services sectors, non-transparent and restrictive regulations and standards, and inconsistent regulatory and customs administration among EU members.”

Another opinion of Germany’s export success as reported in The New York Times, is “the roots of Germany’s export-driven success reach back to the painful restructuring under the previous government of Chancellor Gerhard Schröder. By paring unemployment benefits, easing rules for hiring and firing, and management and labor’s working together to keep a lid on wages, ensured that it could again export its way to growth with competitive, nimble companies producing the cars and machine tools the world’s economies – emerging and developed alike – demanded.”

The same article reported that Germany’s Chancellor Angela Merkel resisted the use of government stimulus spending that the United States and some European partners used to handle the recession. Instead of extending unemployment benefits like the United States has done several times since the recession began, Germany “extended the “Kurzarbeit” or “short work” program to encourage companies to furlough workers or give them fewer hours instead of firing them, making up lost wages out of a fund filled in good times through payroll deductions and company contributions. At its peak in May 2009, roughly 1.5 million workers were enrolled in the program,” and the Organization for Economic Cooperation and Development estimated that “more than 200,000 jobs may have been saved as a result.”

As a result, Germany’s unemployment rate at the height of the global recession was 9.0 percent in contrast to the 10.2 percent of the United States. The German jobless rate in October 2010 was down to 7.0 percent in contrast to the 9.6 percent of the United States. Germany is one of the few economies experiencing a solid recovery and one of the even fewer economies without a substantial deficit crisis on its hands. Germany’s exports surged month by month in 2010, but year-end data hasn’t been released yet.

The US model of free trade has largely worked to create a trade deficit in the US, encourage a consumer based economy based on cheap imported products and undermine American workers. While the US encourages the offshoring of US corporations and unlimited imports into the US economy, it gives no incentives for corporations based in the US to export to other countries. As a result it is at a competitive disadvantage, and is losing out in the struggle to supply its government with cash and its workers with jobs. But instead of a rational assessment of this situation and a resolve to do something about it, the US argues about the President's birth certificate and engages in pointless, meaningless culture wars tantamount to arguing about how many angels can dance on the head of a pin.

Portugal’s government has just fallen in a dispute over austerity proposals. Irish bond yields have topped 10 percent for the first time. And the British government has just marked its economic forecast down and its deficit forecast up.

What do these events have in common? They’re all evidence that slashing spending in the face of high unemployment is a mistake. Austerity advocates predicted that spending cuts would bring quick dividends in the form of rising confidence, and that there would be few, if any, adverse effects on growth and jobs; but they were wrong.

It’s too bad, then, that these days you’re not considered serious in Washington unless you profess allegiance to the same doctrine that’s failing so dismally in Europe.

It was not always thus. Two years ago, faced with soaring unemployment and large budget deficits — both the consequences of a severe financial crisis — most advanced-country leaders seemingly understood that the problems had to be tackled in sequence, with an immediate focus on creating jobs combined with a long-run strategy of deficit reduction.

Why not slash deficits immediately? Because tax increases and cuts in government spending would depress economies further, worsening unemployment. And cutting spending in a deeply depressed economy is largely self-defeating even in purely fiscal terms: any savings achieved at the front end are partly offset by lower revenue, as the economy shrinks.

So jobs now, deficits later was and is the right strategy. Unfortunately, it’s a strategy that has been abandoned in the face of phantom risks and delusional hopes. On one side, we’re constantly told that if we don’t slash spending immediately we’ll end up just like Greece, unable to borrow except at exorbitant interest rates. On the other, we’re told not to worry about the impact of spending cuts on jobs because fiscal austerity will actually create jobs by raising confidence.

How’s that story working out so far?

Self-styled deficit hawks have been crying wolf over U.S. interest rates more or less continuously since the financial crisis began to ease, taking every uptick in rates as a sign that markets were turning on America. But the truth is that rates have fluctuated, not with debt fears, but with rising and falling hope for economic recovery. And with full recovery still seeming very distant, rates are lower now than they were two years ago.

But couldn’t America still end up like Greece? Yes, of course. If investors decide that we’re a banana republic whose politicians can’t or won’t come to grips with long-term problems, they will indeed stop buying our debt. But that’s not a prospect that hinges, one way or another, on whether we punish ourselves with short-run spending cuts.

Just ask the Irish, whose government — having taken on an unsustainable debt burden by trying to bail out runaway banks — tried to reassure markets by imposing savage austerity measures on ordinary citizens. The same people urging spending cuts on America cheered. “Ireland offers an admirable lesson in fiscal responsibility,” declared Alan Reynolds of the Cato Institute, who said that the spending cuts had removed fears over Irish solvency and predicted rapid economic recovery.

That was in June 2009. Since then, the interest rate on Irish debt has doubled; Ireland’s unemployment rate now stands at 13.5 percent.

And then there’s the British experience. Like America, Britain is still perceived as solvent by financial markets, giving it room to pursue a strategy of jobs first, deficits later. But the government of Prime Minister David Cameron chose instead to move to immediate, unforced austerity, in the belief that private spending would more than make up for the government’s pullback. As I like to put it, the Cameron plan was based on belief that the confidence fairy would make everything all right.

But she hasn’t: British growth has stalled, and the government has marked up its deficit projections as a result.

Which brings me back to what passes for budget debate in Washington these days.

A serious fiscal plan for America would address the long-run drivers of spending, above all health care costs, and it would almost certainly include some kind of tax increase. But we’re not serious: any talk of using Medicare funds effectively is met with shrieks of “death panels,” and the official G.O.P. position — barely challenged by Democrats — appears to be that nobody should ever pay higher taxes. Instead, all the talk is about short-run spending cuts.

In short, we have a political climate in which self-styled deficit hawks want to punish the unemployed even as they oppose any action that would address our long-run budget problems. And here’s what we know from experience abroad: The confidence fairy won’t save us from the consequences of our folly.

March 18, 2011

More than three years after we entered the worst economic slump since the 1930s, a strange and disturbing thing has happened to our political discourse: Washington has lost interest in the unemployed.

Jobs do get mentioned now and then — and a few political figures, notably Nancy Pelosi, the Democratic leader in the House, are still trying to get some kind of action. But no jobs bills have been introduced in Congress, no job-creation plans have been advanced by the White House and all the policy focus seems to be on spending cuts.

So one-sixth of America’s workers — all those who can’t find any job or are stuck with part-time work when they want a full-time job — have, in effect, been abandoned.

It might not be so bad if the jobless could expect to find new employment fairly soon. But unemployment has become a trap, one that’s very difficult to escape. There are almost five times as many unemployed workers as there are job openings; the average unemployed worker has been jobless for 37 weeks, a post-World War II record.

In short, we’re well on the way to creating a permanent underclass of the jobless. Why doesn’t Washington care?

Part of the answer may be that while those who are unemployed tend to stay unemployed, those who still have jobs are feeling more secure than they did a couple of years ago. Layoffs and discharges spiked during the crisis of 2008-2009 but have fallen sharply since then, perhaps reducing the sense of urgency. Put it this way: At this point, the U.S. economy is suffering from low hiring, not high firing, so things don’t look so bad — as long as you’re willing to write off the unemployed.

Yet polls indicate that voters still care much more about jobs than they do about the budget deficit. So it’s quite remarkable that inside the Beltway, it’s just the opposite.

What makes this even more remarkable is the fact that the economic arguments used to justify the D.C. deficit obsession have been repeatedly refuted by experience.

On one side, we’ve been warned, over and over again, that “bond vigilantes” will turn on the U.S. government unless we slash spending immediately. Yet interest rates remain low by historical standards; indeed, they’re lower now than they were in the spring of 2009, when those dire warnings began.

On the other side, we’ve been assured that spending cuts would do wonders for business confidence. But that hasn’t happened in any of the countries currently pursuing harsh austerity programs. Notably, when the Cameron government in Britain announced austerity measures last May, it received fawning praise from U.S. deficit hawks. But British business confidence plunged, and it has not recovered.

Yet the obsession with spending cuts flourishes all the same — unchallenged, it must be said, by the White House.

I still don’t know why the Obama administration was so quick to accept defeat in the war of ideas, but the fact is that it surrendered very early in the game. In early 2009, John Boehner, now the speaker of the House, was widely and rightly mocked for declaring that since families were suffering, the government should tighten its own belt. That’s Herbert Hoover economics, and it’s as wrong now as it was in the 1930s. But, in the 2010 State of the Union address, President Obama adopted exactly the same metaphor and began using it incessantly.

And earlier this week, the White House budget director declared: “There is an agreement that we should be reducing spending,” suggesting that his only quarrel with Republicans is over whether we should be cutting taxes, too. No wonder, then, that according to a new Pew Research Center poll, a majority of Americans see “not much difference” between Mr. Obama’s approach to the deficit and that of Republicans.

So who pays the price for this unfortunate bipartisanship? The increasingly hopeless unemployed, of course. And the worst hit will be young workers — a point made in 2009 by Peter Orszag, then the White House budget director. As he noted, young Americans who graduated during the severe recession of the early 1980s suffered permanent damage to their earnings. And if the average duration of unemployment is any indication, it’s even harder for new graduates to find decent jobs now than it was in 1982 or 1983.

So the next time you hear some Republican declaring that he’s concerned about deficits because he cares about his children — or, for that matter, the next time you hear Mr. Obama talk about winning the future — you should remember that the clear and present danger to the prospects of young Americans isn’t the deficit. It’s the absence of jobs.

But, as I said, these days Washington doesn’t seem to care about any of that. And you have to wonder what it will take to get politicians caring again about America’s forgotten millions.

Paul Krugman is professor of Economics and International Affairs at Princeton University and a regular columnist for The New York Times. Krugman was the 2008 recipient of the Nobel Prize in Economics. He is the author of numerous books, including The Conscience of A Liberal, and his most recent, The Return of Depression Economics.

The economy added 192,000 jobs last month, with factories, professional and business services, education and health care among those expanding employment. Retailers, however, trimmed jobs. State and local governments, wrestling with budget shortfalls, slashed 30,000 jobs, the most since November. Federal government hiring was flat.

Private employers added 222,000 jobs last month, the most since April. That shows that companies are feeling more confident in the economy and about their own financial prospects. And it bolstered hopes that businesses will shift into a more aggressively hiring mode and boost the economic recovery.

The unemployment rate is now at the lowest point since April 2009. It has been falling for three months, down from 9.8 percent in November, marking the sharpest three-month decline since 1983.

"These number can be sustained and built on," economist Joel Naroff at Naroff Economic Advisors. "The economy is recovering, there is no question about it. Businesses are finally taking some of those profits they are earning and putting them back into the work force."

The number of unemployed people dipped to 13.7 million, still almost double since before the recession.

When factoring in the number of part-time workers who would rather be working full time and those who have given up looking for work, the percentage of "underemployed" people dropped to 15.9 percent in February. That's the lowest in nearly two years.

The positive news on the hiring front comes as the larger economy is gaining momentum.

Americans shoppers are spending more. U.S. exporters are selling more abroad. Manufacturing is growing at the fastest pace in nearly seven years. And the service sector, which employs about 90 percent of the work force, is expanding at the fastest clip in more than five years.

The 192,000 jobs added in February was a significant improvement from the 63,000 notched in January. Some of the boost came as people resumed work, after dropping off payrolls because of bad weather in January. Still, the gains were widespread.

The number of "long-term" unemployed, people out of work six months or more, sank to 5.99 million, a decline of 217,000 from January.

Workers' paychecks were mostly flat. Average hourly earnings rose to $22.87 in February, up only one cent from January. Workers have little bargaining power to demand big pay raises because the weak jobs market.

February 23, 2011

On Meet the Press last Sunday David Gregory said, "The national conversation is about spending cuts." Really! I thought it was about deficit reduction, and there's two ways to cut the deficit: spending cuts and/or revenue enhancement. The revenue enhancement part of the equation isn't even being discussed. In fact if Obama hadn't compromised on extending the Bush tax cuts for the rich, there would be no need for spending cuts. This society is in a downward spiral precisely because the only consideration is for spending cuts and spending cuts for social services at that. Where is the talk about cutting the bloated military-industrial complex budget which is greater than all the rest of the world's military budgets combined? Where is the talk about cutting the subsidies to the most profitable corporations in world history - the oil companies - and to agribusiness? Where is the talk about fixing the loopholes that let corporations offshore their money and not pay their fair share of taxes. And it goes on and on. Instead, all the talk is about balancing the budget on the backs of the poor and middle class.

And the situation in Wisconsin is all about breaking the backs of the unions which are the largest contributors to Democratic politicians leaving only the big contributors to Republican politicians still active. Republicans are trying to run the table in such a way that the only money in political races will be Republican money. The Democratic party will have been marginalized. Democrats might as well pack their bags and go home if that happens. Republican governors are engaged in a coordinated attack on unions in an attempt to break them. That's why it's so important for Wisconsin workers to stand their ground. Ohio is next. Governor Walker initiated $137. million in tax breaks for business and then declared that their budget was $137. short and they would have to fix it by breaking the unions. What's more the Wisconsin Republicans just passed a measure making it more difficult to raise taxes. So they cut taxes there by creating a financial crisis and use this as a rationale for cutting public services. It's about time that the American middle class woke up and realized what is happening to them at the hands of Republicans whose only goal is to use government to transfer money from the poor and middle class to the wealthy. There is more inequality in America than there is in Egypt for chrissake.

But back to the national budget. Republicans have done everything in their power to insure that no tax breaks for the rich will be rescinded. They voted down Nancy Pelosi's initiative to close the loophole that lets corporations offdhore their money and not pay taxes on it. They voted down inititaives that would let the government negotiate with pharmaceutical companies in order to bring down the cost of drugs. They voted down the initiative that would provide for a public option in the Health Care Bill that would bring down the cost of health care. In fact the problem is not primarily with spending on government programs; it's the fact that Republicans have systematically eroded the tax base for the last 30 years thereby underfunding government and precipitating this downward spiral that they say can only be reversed by busting unions and balancing the budget on the backs of the poor and middle class.

I'm unemployed over two years now, a 99er without any benefits for three months. I followed Unemployed Friends almost from its start, never posted until now, but am grateful for my time with you all. I did as asked with calls and e-mails, etc. I've a confession to make to you all. I'm a criminal.

I've obeyed the 10 commandments and all laws except: I'm unemployed and that's now a crime, I'm poor and that's a crime, I'm worthless surplus population and that's a crime, I'm a main street American Citizen born and raised in the USA and that's now a crime, and I'm euthanizing myself as I write this note -- so arrest my corpse. This isn't a call for help, the deed is done, it's not what I wanted. Death is my best available option. It's not just that my bank account is $4, that I've not eaten in a week, not because hunger pangs are agonizing (I'm a wimp), not because I live in physical and mental anguish, not because the landlady is banging on the door non-stop and I face eviction, not that Congress and President have sent a strong message they no longer help the unemployed. It's because I'm a law abiding though worthless, long-term unemployed older man who is surplus population. Had I used my college education to rip people off and steal from the elderly, poor, disabled and main street Americans I would be wearing different shoes now -- a petty king. Hard work, honesty, loving kindness, charity and mercy, and becoming unemployed and destitute unable to pay your bills are all considered foolishness and high crimes in America now. Whereas stealing and lying and cheating and being greedy to excess and destroying the fabric of America is rewarded and protected -- even making such people petty kings and petty queens among us.

Since the end of 2008, when corporate America began enjoying the resumption of growth, profits have swelled from an annualized pace of $995 billion to the current $1.66 trillion as of the end of September 2010. Over the same period, the number of non-farm jobs counted by the Labor Department has slipped from 13.4 million to 13 million -- there is no recovery for the unemployed and main street. We taxpayers have handed trillions of dollars to the same bank and insurance industry that started our economic disaster with its reckless gambling. We bailed out General Motors. We distributed tax cuts to businesses that were supposed to use this lubrication to expand and hire. For our dollars, we have been rewarded with starvation, homelessness and a plague of fear -- a testament to post-national capitalism.

Twelve years ago, I lost the last of my family. Ten years ago, I lost the love of my life, couldn't even visit him in the hospital because gays have no rights. I fought through and grieved and went on as best I could. Seven years ago, I was diagnosed with Diabetes and Stage 2 high blood pressure with various complications including kidney problems, mild heart failure, Diabetic Retinopathy. These conditions are debilitating and painful. I am on over eight prescribed medications, which is very difficult without insurance and income. But I struggled on and my primary caregiver was very pleased with my effort overtime with my A1C at seven. Still these physical disabilities have progressively worsened, and I have had a harder and harder time functioning in basic ways. All the while, I give thanks to God because I know there are many more worse off than me -- and I tried to help by giving money to charities and smiling at people who looked down and sharing what little I had.

I am college educated and worked 35 years in management, receiving written references and praise from every boss for whom I worked. Yet, after thousands of resumes, applications, e-mails, phone calls, and drop ins, I've failed to get a job even at McDonalds. I've discovered there are three strikes against me -- most 99ers will understand. Strike one -- businesses are not hiring long-term unemployed -- in fact many job ads now underline "the unemployed need not apply." Strike two -- I am almost 60 years old. Employers prefer hiring younger workers who demand less and are better pack mules. Strike three -- for every job opening I've applied, there are over 300 applicants according to each business who allow a follow up call. With the U3 unemployment holding steady at 9.6 percent and U6 at 17 percent for the past 18 months, the chances of me or any 99er landing a job is less than winning the Mega Million Jackpot. On top of that, even the most conservative economists admit unemployment will not start to fall before 2012 and most predict up to seven years of this crap.

I believe the Congress and President have no intention of really aiding the unemployed -- due to various political reasons and their total removal from the suffering of most Americans, their cold-hearted, self-serving natures. Had they really wanted to help us, they could have used unspent stimulus monies or cut foolish costs like the failed wars or foreign aid, and farm subsidies. The unspent stimulus money alone could have taken care of ALL unemployed persons for five years or until the unemployment rate reached 7 percent if Congress and the President really wanted to help us -- and not string us all along with a meager safety net that fails every few months. In any case, if I were to survive homelessness (would be like winning the mega-millions) and with those three strikes against me, in seven more years, I'll be near 70 with the new retirement age at 70 -- now who will hire an old homeless guy out of work for nine years with just a few years until retirement?

So, here I am. Long term unemployed, older man, with chronic health problems, now totally broke, hungry, facing eviction. My landlady should really be an advocate for the unemployed -- she bangs on my door demanding I take action. A phone call and a "please" are not enough for her -- she is angry. She is right to be angry with me, I am unemployed -- as apparently everyone is now angry with us unemployed.

Two hundred and eleven social services cannot help single men. Food banks and other charities are unable to help any more folks -- they are overwhelmed with the poor in this nation. So I have the "freedom" to be homeless and destitute and "pursue happiness" in garbage cans and then die -- yay for America huh? It's the end of November and cold. A diabetic homeless older person will experience amputations in the winter months. So I will be raiding garbage cans for food, as my body literally falls apart, a foot here, a finger there. I have experienced and even worked with pain from my diseases -- hardship I can face. I just cannot muster the courage to slowly die in agony and humiliation in the gutter.

I have no family, I have no friends. For the past two years, I've had nobody to talk with as people who knew me react to the "unemployed" label as if it were leprosy and contagious. I am not a bad person, in fact people really like me. But everyone seems to be on a tight budget these days and living in incredible fear. It is hopeless since we all are hearing more and more that we unemployed are to blame for unemployment, that we are just lazy, that we are no good, that we are sinners, that we are druggies, yet we are the victims who suffer and are punished while the robber baron banksters and tycoons become senators, congress, presidents and petty kings. So the only option left for me is merciful self euthanasia.

It is with a heavy heart that I have set my death in motion, but what I am facing is not living. So off I go, I have made peace with God and placed my burden on Jesus and He forgives me. This nation has become evil to the core, with cold-hearted politicians and tycoons squeezing what little Main Street Americans have left. It is not the America into which I was born -- the land of the free and the home of the brave with kind folks who help neighbors -- it is now land of the Tycoon-haves and the rest of us have-nots who march into hopelessness and despair.

Every unemployed person I have met over these past two years has been saintly. Sharing what little they have, and being charitable -- being kind and patient and supportive. Isn't it amazing that we Americans who suffer so much, have not taken to the streets in violence, riots or gotten out the guillotines and marched on tycoons and Washington in revolt as would happen in most other nations? But rather we plead with deaf politicians to please help us. We don't demand huge sums -- just 300 bucks a week, barely enough to cover housing for most. Most of all we say, please help us get a job, please allow us dignity.

I can't help but juxtapose our plight to the tycoons and politicians. They are never satisfied with their enormous wealth, and always want more millions no matter whom it hurts. They STEAL from pension funds, banks, the people and government, and little Wall Street investors. Then rather than face punishment, they become petty kings in this world. They are disloyal to America, unpatriotic, and serve their own foreign UN-American greedy causes and demand more and more and more. I feel that this is not the nation into which I was born. I was born in America, the land of the free and the home of the brave. America, where people give as much as they receive. America, where all people work for the common good, and try to leave a better and more prosperous nation for the next generation. America, where people help their neighbors and show charity and mercy. This new America is alien to me -- it is an America of greed and corruption and avarice and mean spirited selfishness and hatred of the common good -- it is an America of savage beasts roaring and tearing at the weak, and bullying the humble and peacemakers and poor and those without means to defend themselves. I am not welcome here anymore. I don't belong here anymore. It's as if some evil beast controls government, the economy, and our lives now.

I must go now, my home is someplace else. Goodbye and God bless you all. God bless the unemployed and poor and elderly and disabled. God bless America and the American people except the tycoons and politicians -- may God retain the sins of tycoons and politicians and phony preachers and send them to the Devil.

Mark

Mark is at peace now having chosen death as the best option available to him. Sick, old - but not old enough to collect social security - and destitute, it seems that death is preferable to a homeless life digging through garbage cans.

A favorite subject of attack for the right wing is social security. There is no crisis in social security. All they have to do is to lift the cap - the amount of income on which social security is taxed - and social security would be in the black forever. All this would mean is that the rich would be taxed a little more. Naturally, the Republicans don't want to do it. You have to follow the money in politics. Republicans don't want to extend unemployment for the unfortunate, and they don't want to do anything that would result in the rich paying more taxes. In addition social security payouts could be means tested. Those with ample pensions and wealth shouldn't receive it at all. Naturally, Republicans don't want to take this route either. Finally, the social security trust fund contains $2.5 trillion. That represents Treasury bonds backed by the full faith and credit of the US government. But you'll never hear Republicans mention this either. The only thing they will talk about is that social security payouts will add $45 billion to the deficit this year. That's because the money coming in is less than the money going out. As long as the reverse was true, Republicans were only too glad to pay for their tax breaks for the rich on the backs of the regressive, overcharged social security taxes. Now that the government needs to draw on that $2.5 trillion in the social security trust fund and float more Treasury bonds to refinance it, Republicans are all worried. Give me a break.

The Health Care Act needs to be amended in such a way as to deal with the rising costs of Medicare, but Republicans won't do that either. Democrats tried with the original version. It all depends on whose ox is gored and the Republican ox is the private health insurance companies that are driving up the cost of health insurance and Medicare. A rational system would contain costs as every other country has done. In Germany, by the way, unemployment insurance never ends, and there is free health care during unemployment. Most advanced countries will bend over backwards with assistance in helping the unemployed find a job. After all it's in their best interests to do so since it lowers unemployment payouts and increases incoming taxes. But the logic of this strategy seems to have fallen on deaf ears in the US. US to the unemployed: fend for yourselves.

The military-industrial complex needs to be scaled back to a reasonable level. Hundreds of billions could be potentially saved there. Republicans don't want to consider this either. Finally, the Bush tax cuts for the wealthy need to be ended if Republicans are serious about debt reduction. The downward spiral the US finds itself in is caused primarily by historically low levels of taxation on the wealthy. The country was in much better fiscal shape under Eisenhauer, Nixon and Clinton when taxes on the wealthy were much higher. I don't think the wealthy were suffering then and the economy in general was much more robust.

The continuation on this current path of cutting taxes and then curtailing government programs is resulting in a downward spiral that will turn the US into a third rate nation within a generation or two.

February 15, 2011

Two research laboratories are developing computers to new levels of sophistication that are making human work (and jobs) increasingly irrelevant. There are two fields, one called Artificial Intelligence (AI) and the other called Intelligence Augmentation (IA) that are revolutionizing technology and transforming the world.

Watson is an effort by I.B.M. researchers to advance a set of techniques used to process human language. It provides striking evidence that computing systems will no longer be limited to responding to simple commands. Machines will increasingly be able to pick apart jargon, nuance and even riddles. In attacking the problem of the ambiguity of human language, computer science is now closing in on what researchers refer to as the “Paris Hilton problem” — the ability, for example, to determine whether a query is being made by someone who is trying to reserve a hotel in France, or simply to pass time surfing the Internet.

...

Traditionally, economists have argued that while new forms of automation may displace jobs in the short run, over longer periods of time economic growth and job creation have continued to outpace any job-killing technologies. For example, over the past century and a half the shift from being a largely agrarian society to one in which less than 1 percent of the United States labor force is in agriculture is frequently cited as evidence of the economy’s ability to reinvent itself.

That, however, was before machines began to “understand” human language. Rapid progress in natural language processing is beginning to lead to a new wave of automation that promises to transform areas of the economy that have until now been untouched by technological change.

“As designers of tools and products and technologies we should think more about these issues,” said Pattie Maes, a computer scientist at the M.I.T. Media Lab. Not only do designers face ethical issues, she argues, but increasingly as skills that were once exclusively human are simulated by machines, their designers are faced with the challenge of rethinking what it means to be human.

I.B.M.’s executives have said they intend to commercialize Watson to provide a new class of question-answering systems in business, education and medicine. The repercussions of such technology are unknown, but it is possible, for example, to envision systems that replace not only human experts, but hundreds of thousands of well-paying jobs throughout the economy and around the globe. Virtually any job that now involves answering questions and conducting commercial transactions by telephone will soon be at risk. It is only necessary to consider how quickly A.T.M.’s displaced human bank tellers to have an idea of what could happen.

That is the underside of technological advancement - replacing human labor and well paying jobs with machines. That would be OK if the benefits of the reduction in the labor force were widely shared, but they aren't. The benefits accrue mainly to the large corporations that can deploy these machines while the people who are displaced find themselves mainly out of a job and out of the ability to support themselves and their families. Labor saving machines do not mean that the average person will not have to work as hard. They mean that the average person will be out of his or her job. Corporations on the other hand will continue to merge and acquire other companies as they march forward in their quest for dominion over the economy. Ownership of assets will become concentrated in fewer and fewer hands. Those whose main economic asset is their job skills will be marginalized while those whose main asset is the ownership of wealth will continue to get wealthier.

That is why the reliance on increased education as a way out of this dilemma is a chimera. There will be increasing competition for the few remaining highly skilled jobs. There will be an ever intensifying global rat race as Tiger Moms ride herd on their kids to work harder and harder in the global competition for the diminishing number of good paying jobs. Economies will have to reinvent themselves at a faster and faster pace.

That in a nutshell is what is going on today as more and more workers find themselves jobless. If those workers are also owners of economic assets, they can make their living from the return on their investments, but too often their ownership status is meager. They may own their own home, but for most middle class Americans, that is about it; home ownership is their main economic asset. But without a job, equity in a home rapidly disappears until the home is underwater, that is, the home owner owes more than the home is worth. The utopia in which labor saving machines replace the need for human labor with the result that everyone has more free time to enjoy life and the workweek is reduced to just a few short hours is replaced by the dystopia in which out of work former job holders struggle to survive after their unemployment benefits run out. In a society which is becoming increasingly austere, those unfortunate enough to have been replaced by machines, instead of enjoying their increased leisure time, wonder where their next meal is coming from as they face the prospect of living in a cardboard box on the street.

In order for technological advancement to be truly benign, the benefits of the reduction in the need for human labor would have to be widely shared either by spreading ownership of assets more equitably or by redistributing the benefits from owners to non-owners by means of the tax code in the form of welfare. The only way to spread ownership is for the people collectively to engage in wealth producing activities either via their government or by means of cooperatives like Mondragon. If just a few people own economic assets which generate the necessary goods and services, the rest of the population who have had their jobs made redundant and who are "at liberty" will not be able to purchase those goods and services and the economy will grind to a halt especially, ironically enough, in the more developed and advanced parts of the world. The economically developing nations will not fall prey to this phenomenon as badly since their cheap labor, that labor which machines cannot do, will distribute jobs and paychecks to a relatively large number of human hands. But even in these societies ownership of assets will largely come to reside in fewer and fewer hands as job holders will continue to derive economic sustenance mainly from their jobs and not from the return on assets they own.

Societies in which the return from wealth producing assets is widely shared by redistributing wealth from the successful to the unsuccessful will continue to function at a high level because not only will most people have the wherewithal to provide the necessities of life for themselves, but this economic activity will keep the wheels of industry turning albeit they will be turning with fewer and fewer human hands and more and more by machines operating at the behest of sophisticated computers. These "welfare states" will recirculate the wealth that is being created in such a way that more wealth is created. Their governments will be prosperous because of a healthy tax base, and they will continue to provide a large range of public services and infrastructure development. Those societies that don't recirculate wealth will become moribund as their economies grind to a halt. As fewer humans and more machines possess jobs, the tax base will be diminished to the point that even essential human services, services that only human beings can provide such as police, firemen and teachers will be reduced or eliminated to be replaced to some extent by private security guards, private fire districts and private schools.

Some societies may well become utopias. Those are the societies in which the winners in developing new products and services essentially support those unfortunates whose productive efforts went substantially by the wayside. These are societies which conform to the ethic of "we are all in this together." Winners will support losers in the quest for development of new products and services. Other societies will become dystopias as wealth is not widely shared, the benefits of labor reduction are concentrated in fewer hands, government tax bases are eroded and public services dry up. These are the so-called "me societies" in which the ethic is "every person for him or herself." The benefits of labor reduction will accrue to those who are the owners of economic assets and can use machines to replace the need for human labor in their economic operations. Their profits will soar since one of their major expenses is human labor. A machine can crank 24 hours a day; a human can't. Eventually though, their profits will diminish as a diminished consumer base can no longer afford to buy much of anything. Money and assets will be concentrated at the top and stop circulating as the society spirals downward and becomes non-functional.

"The whole neocon idea of spreading democracy in the middle east by attacking and invading a country in order to change it from a dictatorship to a democracy is a ridiculous proposition on the face of it, but that's what the neocons were selling. And the preposterous notion that this was a moral undertaking - it was morally a good thing to do - to bring death and destruction to a nation in order to spread democracy is as repugnant as the notion that Hitler was morally correct to invade weaker countries because the Germans were the most advanced civilization composed of the stongest and best people. The American supermensch, according to the neocons, would advance the Iraqi undermensch to democracy and freedom. Depite the cost in death and destruction, they would thank us some day. They would throw flowers at the advancing troops much as the Austrians threw flowers at the German army during the Anscluss."

This pretty well sums up American policy under George W Bush and the neocons. Their notion of forcing democracy on a country by invading it played out in Iraq and Afghanistan. The IMF and the World Bank were US surrogates which forced policies of privatization, deregulation and shredding of the social safety net down the throats of any country not stong enough to resist. The neocon US saw as its duty the forcing of what they considered to be American values down the throats of the rest of the world. The result in many cases was the creation of an elite class of wealthy oligarchs and increased poverty among the majority of the people with a corrupt and repressive dictator favorable to American intersts at the top. The intersection of political and economic power was complete. Such was the case in Egypt.

For those that say that this protest came out of nowhere, let me set the matter straight. There have been protests as recently as last June. They just never got the mass publicity. In an article, Privatization and Corruption in Egypt, we find the following:

Last June there were protests against privatization in Egypt. The protests were so severe that the government actually decided to effectively end the program. Since the 1990's a key economic priority in Egypt was the privatization of state owned industries and a transition from a centrally controlled economy to a more free market oriented economy that would be part of the global capitalist system.

The justification for such a move was the inefficiency of the state controlled command economy. However, the more pressing concern was to open up the country to foreign investment and also enrich crony supporters of the government through privatization of state owned assets at fire sale prices.

Many in the public long believed that privatization of state companies involved corruption involving insider dealings and opposed it for this reason but also there was oppoosition from some old guard officials who thought that privatization would be destabilizing. When the state owned companies, this ownership could be used to help control dissent. Wages could be raised and people could be employed even when in purely capitalist market terms they were not needed. In fact they provided a social safety net of sorts.

The privatization has already gone about as far as it could go. Remaining state companies often are technologically outdated and overstaffed with poorly trained workers. No capitalist investors are interested in buying them except perhaps at very low prices.

In June of 2010 thousands of workers protested outside parliament complaining about lost jobs, wages, and social protections. Fearing even more political unrest the government decided to drop further privatization for now. The government has even bought back several companies from investors.

The demand from the international business community has been for further "reform"to cut Egyptians expectations. Egyptians expect their government to do things for them not just for business! Experts claim that the fundamental mistake of the government was in failing to reduce public expectations. Under the command economy and state ownership people expected the state to be the primary provider. People supported the government because the government gave everyone jobs. The experts complain that there are still about six million state civil service employees. Of course the reform would be to privatize most of these services, make them centers for private profit and investment and hire only if this made money for investors.

The new view of this is expressed by an official. Anonymous of course and to the New York Times! ‘You educate me, give me a degree, you give me a job, when I die you bury me - and I do nothing.' " Of course they did do something; they kept the system going inefficient or not. The problem is that it is not part of the system of global capitalism and it does not provide much for private profit or investors.

Political scientist Amr El-Shobaki said that privatization was a way that friends of the rich and powerful could grow more rich and powerful. The privatization process had begun under Anwar Sadat but it begin in earnest in 1991.

The goal was to privatize 314 companies. All the bargains are gone to investors, dissolved or merged with other state companies. 150 are still left.

Shobaki said:"There is always a cost for reform, but the problem here is that people now have the impression that those who always pay the cost of every reform are the simple people, while businessmen are never held accountable for corruption and while privatization of companies takes place in secret, without the knowledge or participation of the people," Perhaps people's impressions are correct.

Faced with opposition to privatization the government took another tack. Open the door to foreign investment and let state industries wither. In the Egyptian context, economists say it is a victory that this work force has shrunk, to about 300,000 from about 1.3 million in 1978. Right, it is a victory that jobs are lost. THe government that scored that victory is now in danger of falling. One of the reasons is the high unemployment.

The government has adopted other "reforms" to reduce expectations of the Egyptian working class and whip them into shape. The government adopted a law that allowed state-owned companies to deal with employees in the same way as private-sector companies. In 2009 it began to carry out a new law allowing the private firms to build infrastructure, including sewage plants and hospitals, another unpopular move intended to whittle away the state-dominated system.

A study of Egyptian attitudes show a quite different view of privatization and the role of government than in the U.S. Consider this:

""The majority of citizens believe that the best system would strengthen the role of the state and the public sector; only 20% of citizens considered privatization to be beneficial to Egypt’s economy. ""

There you have it, friends, in a nutshell! Privatization, a core neocon value, led to large scale unemployment and it was this that was the primary factor behind Egypt's revolution. You had large numbers of young college educated people with no job prospects. You had fantastic wealth among a tiny elite while the rest lived in poverty. This revolution was about corruption in this sense, but it was all perfectly legal. Mubarak himself had siphoned off $70 billion dollars from the system which required foreign investors to enter into partnerships with Egyptians owning 51%. The best state owned companies had been privatized and snapped up by foreign investors. The remaining state owned companies were virtually worthless. No investor wanted to buy them. In the name of efficiency workers had been laid off.

The New York Times confirmed that what was happening was the sell-off of state owned enterprises to private investors with the consequence of laid off employees and high unemployment:

Privatization began in earnest in 1991, when Egypt agreed to work with international lenders on an economic restructuring plan to help it repair a failing economy. This represented an effort to accelerate changes started in the 1970s by President Anwar el-Sadat, who began the process of dismantling the state-controlled economy fashioned by President Gamal Abdel Nasser in the 1950s and early ’60s.

The 1991 effort started off easily enough when the state readily found buyers for assets like its beer and cement industries. But over time, the state said it was left with difficult-to-sell assets, outdated factories producing cars, instruments for textile manufacturing and other things that are either obsolete or unwanted. At the same time public pressure became intense as workers complained that their rights were being auctioned off.

The goal was originally to sell off 314 companies. There are still 150 left: the rest have been sold to investors, gone public on the stock market, dissolved or merged with other state industries.

“There is always a cost for reform, but the problem here is that people now have the impression that those who always pay the cost of every reform are the simple people, while businessmen are never held accountable for corruption and while privatization of companies takes place in secret, without the knowledge or participation of the people,” Mr. Shobaki said.

Faced with so many obstacles, the government took another approach, trying to open the door to foreign investment while quietly allowing state industries to wither. In the Egyptian context, economists say it is a victory that this work force has shrunk, to about 300,000 from about 1.3 million in 1978.

The government also adopted a law that allowed state-owned companies to deal with employees in the same way as private-sector companies. This year it began to carry out a new law allowing the private firms to build infrastructure, including sewage plants and hospitals, another unpopular move intended to whittle away the state-dominated system.

So fundamentally the revolution was about jobs. It was about economic democracy as opposed to economic aristocracy. It was a rejection of crony capitalism in which state owned assets are sold off to a group of politically powerful and connected insiders. It was about a repudiation of neocon values. The reason that the American right wing is so upset is that they are afraid that the Muslim Brotherhood will take over. They are upset over the word "Brotherhood." Any new economic system put in place by the Egyptian people that has anything to do with "Brotherhood" is antithetical to American economic values, the values of capitalism. Why it might mean redistribution of wealth not from the poor to the wealthy which they favor but in the other direction from wealthy to poor which they don't. When George W Bush and the neocons talked about "democracy," democracy was just a euphemism for American style capitalism - a top down elite of wealthy investors and a majority underclass living in poverty with a repressive dictator at the top who maintained stability so American interests in the region would not be transgressed. The American right wing has gotten so comfortable with sham democracy that it has a problem with anything approaching authentic democracy.

But the Egyptian people are interested in real democracy not sham democracy, and that real democracy very definitely has an economic component as did the 1948 UN Declaration of Human Rights which states: "Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control." The Egyptian revolution is a repudiation of neocon values, a repudiation of privatization, deregulation, austerity and shredding of the social safety net. It is more than a call for free elections and a new parliament. It is a call for economic as well as political justice. Let's hope that the Egyptian people's revolution is not hijacked.

It's impossible to know what went on behind closed doors, but the final results show that the military sided with the people and against the oligarchy. If Bush were President, the results might have turned out differently. The military might have been persuaded to turn on the people thus preserving American interests in the region. The victory of the Egyptian people does not mean a repudiation of American interests, just a rejection of neocon values. Neocon values are only American values when Republicans are in control. The fact that we have a President Obama and Democrats are in power in the White House means that American values have shifted. Now American values can support and work hand in hand with a true democracy in Egypt. This might be the paradigm shift which truly delivers power and economic justice to the people and away from the interests of globalized transnational corporations and the international wealthy class of elite investors. Let's hope so.

February 08, 2011

“We can, and we must, work together,” the President told the U.S. Chamber of Commerce today. “Whatever differences we may have, I know that all of us share a deep, abiding belief in this country, a belief in our people, a belief in the principles that have made America’s economy the envy of the world.”

Really? I’ve been watching (and occasionally trying to deal with) the Chamber for years, and all I know is it has a deep, abiding belief in cutting taxes on the wealthy, eroding regulations that constrain Wall Street, cutting back on rules that promote worker health and safety, getting rid of the minimum wage, repealing the new health-care law, fighting unions, cutting back Medicare and Social Security, reducing or eliminating corporate taxes, and, in general, taking the nation back to the days before the New Deal.

So what, exactly, is the deal Obama is pitching to the Chamber?

He said his administration will “help lay the foundation for you to grow and innovate,” by eliminating “barriers that make it harder for you to compete - from the tax code to the regulatory system,” and by completing more trade deals.

In return, the President said he wants businesses to hire more Americans. “Many of your own economists and salespeople are now forecasting a healthy increase in demand. So I want to encourage you to get in the game,” he said. “And as you hire, you know that more Americans working means more sales, greater demand and higher profits for your companies. We can create a virtuous cycle.”

Virtuous cycle? American businesses are doing quite nicely as it is. Their profits are soaring. And one reason they’re doing so well is they’re holding down costs, especially payrolls. So why would they ever agree to add more workers now?

From the standpoint of the nation as a whole more Americans working may mean even higher profits overall. But publicly-traded companies aren’t in the business of spending money to help other companies. To the contrary, they’re competing with one another to show high quarterly earnings in order to boost their share prices. They’ll “get in the game” and begin to hire large numbers of Americans only when it helps their own bottom lines.

And when will that be? Not long ago I debated a conservative economist who argued American workers had priced themselves out of the global labor market and would therefore have to settle for lower real wages and benefits before they’d be hired back in large numbers. By his logic, many health and safety regulations would also have to be compromised or abandoned, since they also make American workers more expensive.

If this is the tacit bargain the President is offering business, it’s not a good deal for American workers.

There’s no secret to creating lots of jobs by reducing the median wage, slashing benefits, compromising health and safety at the workplace, and, effectively, reducing the standard of living of millions of Americans. We’ve been doing it for years.

And it doesn’t lead to a “virtuous cycle.” It leads to the kind of economy we’ve had for years – including, right now, the most anemic recovery from a deep trough since the mid-1930s. Indeed, when the debt bubble popped in 2008, we discovered how many Americans no longer had the ability to buy enough to keep the economy going. In this and other ways, 2008 bore an uncomfortable resemblance to 1929.

The alternative is to create lots of jobs with high disposable incomes.

In the short term, this means expanding the Earned Income Tax Credit wage subsidy right up through the middle class, and cutting income and payroll taxes for everyone earning less than $80,000 a year – making up the lost revenues by raising the ceiling on Social Security payroll taxes and hiking marginal taxes on the rich.

In the longer term, this means investing in a world-class education for all the nation’s kids, including college or high-quality technical education beyond high school. Here again, we’d have to rely on the top 1 percent (who now take home more than 20 percent of all income) to foot the bill.

Might the CEOs and top executives who comprise the U.S. Chamber of Commerce go along with this? After all, they profess to be patriotic. As the President said, they “share a deep, abiding belief in this country, a belief in our people, a belief in the principles that have made America’s economy the envy of the world.”

February 04, 2011

Do you think that revolution in Egypt might have something to do with the fact that President Mubarak is worth $70 billion while the average person makes $2000. a year? I think so. How long will a people live in poverty while their ruler lives in opulent splendor? And most of the young people in Egypt fomenting revolution, the unemployed, are college educated because college education is free in Egypt. So they are smart enough to know that Egypt's elite class, the ones who left Egypt on private jets when the trouble started, are ripping them off. And then we talk about corruption. Is it corruption? No, not at all. Egyptian law requires that foreigners give a local business partner a 51 percent stake in most ventures. And who do you think that foreign corporations chose as their most favored business partner? Corruption? No, not when it's the law. The corruption lies with the lawmakers.

Twenty percent of Egypt's population lives on less than $2 a day. After a protest over food prices in which three people were killed, the Egyptian government was forced to subsidize the most important food item in Egypt: bread. However, not all Egyptian bakeries sell subsidized bread, which has created huge pressures on those that do.

As a result, it is common for many Egyptians to wait many hours before being able to buy bread at subsidized prices. In an average store, one beta costs 10 cents, while in a subsidized shop it costs only one cent. "Unsubsidized bread used to be affordable, but now the prices have skyrocketed," one bakery owner told Al Jazeera.

After long hours of waiting in long lines to buy bread all over Cairo, people sometimes lose their temper, with fatal results. Eleven people have died in bread feuds – some in knife fights – in the past 11 months. If the price of food continues to rise, more violence is expected. According to Al Jazeera, Egypt saw widespread riots over bread in 1977, which left up to 70 people dead.

Meanwhile, some families have become vegetarian, since they can no longer afford to buy meat. Most Egyptians now rely on potatoes and rice to feed their large families.

A mother of five, Hala Suliman told Al Jazeera, "I was forced to give up many important things in my life due to the rise in food prices. My kids want meat and fruits, but I have no money." Suliman and her husband work at a coffee shop and have a combined income of $4 a day, but they have five children to feed. Each day, Suliman's oldest son waits three or four hours in bread lines instead of going to school.

Egyptian journalist Mahmoud El-Askalani told Al Jazeera, "Of course, as a journalist, my salary isn't bad, but I've been affected because the increase in food prices is too high even for the middle class."

In fact, he felt so strongly about the rise in food prices that he started an organization called Citizens Against Price Rises. El-Askalani told Al Jazeera, "I want to achieve through this organization a popular movement that stands up to the rise in food prices." He believes that the pro-business government has allowed businesses to make huge profits while many people go hungry.

Some families in Egypt have taken their children out of school, are visiting doctors less, and eat smaller meals. According to Heba Kamel of the World Food Programme, the rise of food prices has created "new faces of hunger" as "more and more middle income earners are feeling the crunch of food prices."

Egyptian, Tunisian and Yemeni protesters all say that inequality is one of the main reasons they're protesting.

However, the U.S. actually has much greater inequality than in any of those countries.

Specifically, the "Gini Coefficient" - the figure economists use to measure inequality - is higher in the U.S.

Gini Coefficients are like golf - the lower the score, the better (i.e. the more equality).

According to the CIA World Fact Book, the U.S. is ranked as the 42nd most unequal country in the world, with a Gini Coefficient of 45.

In contrast:

Tunisia is ranked the 62nd most unequal country, with a Gini Coefficient of 40.

Yemen is ranked 76th most unequal, with a Gini Coefficient of 37.7.

And Egypt is ranked as the 90th most unequal country, with a Gini Coefficient of around 34.4.

And inequality in the U.S. has soared in the last couple of years, since the Gini Coefficient was last calculated, so it is undoubtedly currently much higher.

So why are Egyptians rioting, while Americans are complacent?

Perhaps it's because Americans don't have to wait in long lines just to get a loaf of bread. The poor can get food stamps, and charities give away free meals. Life at the bottom in America is not that bad - at least yet. But Republicans are working on taking away what social programs there are that still exist in the US. They want austerity for the poor, opulence for the wealthy. Eventually, this will lead to Third World conditions for the poor in the US as well. The neocon model for developing countries is austerity for the poor and laissez faire capitalism for the rich. Young Egyptians are complaining that there are no jobs. We Americans know how to create jobs - you give tax breaks to the rich. Ha! Ha! By this token the Egyptians should give tax breaks to Mubarak and his cronies. This is the neocon model espoused by Milton Friedman that was used so unsuccessfully in Latin America. Will neocons see Egypt as a perfect opportunity for "disaster capitalism"? They would if they were still in charge. But, fortunately, George W Bush, has been replaced by Barack Obama. The neocons are out. Mr. Civility is in. Whewww!

Latin America has always been the prime laboratory for this doctrine. Friedman first learned how to exploit a large-scale crisis in the mid-1970s, when he advised Chilean dictator Gen. Augusto Pinochet. Not only were Chileans in a state of shock following Pinochet's violent overthrow of Socialist President Salvador Allende; the country was also reeling from severe hyperinflation. Friedman advised Pinochet to impose a rapid-fire transformation of the economy--tax cuts, free trade, privatized services, cuts to social spending and deregulation. It was the most extreme capitalist makeover ever attempted, and it became known as a Chicago School revolution, since so many of Pinochet's top aides and ministers had studied under Friedman at the University of Chicago. A similar process was under way in Uruguay and Brazil, also with the help of University of Chicago graduates and professors, and a few years later, in Argentina. These economic shock therapy programs were facilitated by far less metaphorical shocks--performed in the region's many torture cells, often by US-trained soldiers and police, and directed against those activists who were deemed most likely to stand in the way of the economic revolution.

And surprise, surprise, the neocons were active in Egypt during the 1990s with equally unsavory results leading to today's riots:

Any number of political and social factors underpins the current unrest in Egypt—and as always, economics figures in. The upheaval has shined a light on two serious problems facing the country: Most jobs pay too little, and most food costs too much.

First, the structural issue: Egypt has posted solid economic growth numbers, particularly in the past half-decade, but that growth has failed to improve the quality of life or income of most of its 80 million citizens. In the 1990s, Cairo embarked on a broad privatization and liberalization project, redoubling its efforts to attract foreign investment again in the mid-2000s. Those efforts succeeded, boosting GDP growth from about 4 percent in 2004 to more than 7 percent in 2008. Egypt has also fared well through the global recession, with gross domestic product increasing 4.7 percent in 2009 and 5.2 percent in 2010, even as other developing economies faltered.

But those gains have not been shared broadly. According to World Bank statistics, Egypt's top quintile of earners has increased its share of income since the 1990s, while the country's bottom quintile has seen its portion of the pie get smaller. Poorer Egyptians feel no richer, despite the recent gains. Youth unemployment remains a particularly pernicious problem. About two-thirds of Egyptians are under the age of 30—and that age cohort makes up a whopping 85 percent to 90 percent of the unemployed. In comparison, youths make up about 40 percent of the unemployed in nearby Jordan. (Jobless youths, particularly jobless young men, tend to pose instability risks in general.) Millions more face underemployment or the prospect of dead-end careers in the civil service. And overall, the country remains poor: About 40 percent of Egyptians live on less than $2 a day, and the nation's total GDP is about the size of Connecticut's.

Then, there is a secondary problem: a huge run-up in food costs in recent months. According to the Food and Agriculture Organization of the United Nations, the worldwide food price index is at an all-time high—surpassing its 2008 peak, when skyrocketing costs caused global rioting and pushed as many as 64 million people into poverty. The price of oils, sugar, and cereals have all recently hit new peaks—and those latter prices are especially troubling for Egypt, as the world's biggest importer of wheat.

Neoconism, globalization, laissez faire capitalism, Milton Friedmanism - call it what you will. The results have been predictable - the enrichment of a small global class of elite wealthy people and the immiseration of the masses. The elite of Cairo live in gated communities sequestered away from the stink and poverty of downtown Cairo. As the protesters continue their quest for a decent life, one must ponder the question: will the revolution in Egypt turn out to be a "people's revolution," perhaps led by the Muslim brotherhood? Western business interests would prefer that this not happen. Instead they would prefer that the present regime shuffle its players and co-opt any true revolution, a revolution that would put the interests of the people first instead of the interests of a wealthy elite in bed with transnational corporations. The Mubarak family owns real estate in Paris, New York, Beverly Hills and many other places around the world. Although Mubarak has said he wants to die on Egyptian soil, Parisian or American soil might do just as well. He could avoid the stink that way.

January 29, 2011

Has anyone noticed that new unemployment claims just climbed by 51,000 to 454,000? Maybe we're tired of being reminded about the jobless rate. It was politely ignored in President Obama's State of the Union Address, even as he promised to boost opportunities for the next generation.

The number of unemployed stood at 205 million in 2010, essentially unchanged from the year earlier... with little hope for this figure to revert to pre-crisis levels in the near term.

The ranks of the jobless include some 78 million young people worldwide, a rate of 12.6 percent. That's a slight decline from the previous year but millions more than the 2007 levels. And since the data suggests "discouragement among youth has risen sharply," there is also the untold shadow number of youth who've simply fallen out of the workforce.

current estimates for 2010 show a level of unemployment at 10.3 per cent, which is the highest regional rate in the world. The youth unemployment rate is almost four times the adult rate. Gender inequalities continue to be a major concern, as the gap between male and female employment-to-population ratios, at 47.2 percentage points, is twice the global average. Economic growth in 2011 is projected at 5.1 per cent, falling short of precrisis trends, with little change expected in the region's unemployment rate.

Although North Africa didn't suffer as much as other regions in the recession, the data depicts a deep long-term slump:

An alarming 23.6 per cent of economically active young people were unemployed in 2010. Productivity growth continues to be sluggish and leaves little scope for increases in wages and salaries or for progress in expanding social protection systems.

The Brookings Institution last year described a so-called youth "unemployment paradox," in which declining unemployment "is paradoxically associated with a deterioration of job quality rather than any major improvement in labor market conditions." It drew a striking comparison between the widespread youth joblessness Egypt and the United States:

The United States arrives at this juncture as a result of the worst economic recession in 70 years. Underemployment in Egypt, on the other hand, stems from a rapidly growing youth population faced with the consequences of a partial and fragmented transformation of the economy from a state-led to a market-oriented development model....

In all likelihood, the U.S. economy will resume its growth and will eventually start creating new jobs, but the high cost of health care and continued economic uncertainty may significantly slow the creation of good jobs. Like young Egyptians, young Americans may have to reduce their expectations about the quality of jobs they expect to attain in this current market and hope to upgrade over time.

What the report didn't predict, however, was a more radical reaction. The explosion of protest in Cairo shows that young people can only be forced to reduce their expectations so much, before they start pushing back and demanding revolution.

The popular uprisings obviously aren't just a response to unemployment; they're a revolt against corrupt authoritarian government, uneven development, and social disenfranchisement. And, countering Western stereotypes of "religious fundamentalism," what we've witnessed in several Arab countries reflects a secular, democratically structured youth movement driven primarily by a desire for meaningful work and economic citizenship.

made it clear that political opposition parties, long defunct and impotent, have been replaced by grassroots social action. Their fears of detention and torture have been supplanted by the need for better living conditions and better wages.

To help workers cope with the global crisis, the ILO urges governments to focus on creating quality jobs and strengthening social protections, instead of merely obsessing over deficits.

Echoing Brookings's warnings about long-term decline in job quality, ILO Director-General Juan Somavia argued, "We must not forget that for people the quality of work defines the quality of a society,"

The U.S. isn't yet on the cusp of a social breakdown, but its youth are moving into an era of unprecedented frustration. How long before they tire of letting their hopes suffocate-and join their peers around the world to organize and shake up the status quo?

Michelle Chen's work has appeared in AirAmerica, Women's International Perspective, Extra!, Colorlines and Alternet. She is a regular contributor to In These Times' workers' rights blog, Working In These Times. She also blogs at Racewire.org.

I was shocked to listen to the Ed show on msnbc and hear a pundit's analysis of what was going on in Egypt. It seems the protests were all about jobs or the lack thereof. 40% of the population lives below the poverty line. In the US 40 million are below the poverty line. Political analysts maintain that the Obama administration is all about jobs, jobs jobs. In Egypt there is a great disparity between the rich and the poor. Ditto for the US. The pundit said that Egypt's economy will probably grow about 5% this year. Hmmm. Respectable economic growth without a corresponding increase in jobs. Sound familiar? The US will probably not even attain Egypt's GDP growth. In both cases economic growth does not translate into job creation or a diminution of the disparity between the rich and everybody else.

As I drifted in and out of sleep, I couldn't tell whether they were talking about Egypt or the US. American spokepeople were like taking this superior tone with repect to Egyptian dilemmas while I wanted to pinch them and say, "Pssst. You know it's the same situation in the US. You know it's all about unemployment even though "the economy" is doing well. The President told us so in his SOTU speech. The stock market's up." I guess "the economy" can do well without most of the people doing well if most of the rewards go to a small elite upper class. So the same thing is happening in Egypt as is happening in the US only on a larger scale. When the US hits 40% unemployment I would think that there would be rioting in the streets here as well. But all this self-righteous blather from pundits and politicians like we really have our act together and pity those poor Arabs that don't have any jobs. The fact of the matter is the same problems plague the US as plague Egypt. We just haven't gotten quite to their level of desperation. But this is nothing to be smug about because we're getting there.

Unemployment is a problem on a global level. There just aren't enough jobs to go around. In the old days people used to be backward but self-sufficient, as UCLA professor Anton Weber points out in his series, "The Western Tradition." They grew their own food, built their own houses, supplied their own energy in the form of human and animal labor. Today as the world has urbanized, more and more people are dependent on the market economy in order to survive. They are dependent on a job for the cash required to participate in the cash economy. This process of urbanization has been going on for some time now. As the world's population continues to increase at a fast pace, the new addition of human labor to the world is just not needed. Computers, automated machines and robots have diminished the need for human labor just as the work force on a global level has skyrocketed. Coincidentally, just before the Egyptian situation erupted, Arianna Huffington, attending the Economic Forum in Davos, Switzerland wrote the following:

My day started with taking part in a CNBC debate entitled "The West Isn't Working," focused on global employment. The debate was divided into two parts. The first part was on the motion, "For a dynamic workforce, go East!" and centered on the rise of China and India and the decline of the West as an engine for growth and employment opportunities. Kiran Mazumdar-Shaw, the chairman of Biocon, argued in favor of the motion while Barry Silbert, the CEO of SecondMarket, argued against. Laura Tyson, a member of Obama's Economic Recovery Advisory Board, Philip Jennings, the general secretary of the UNI Global Union, and I challenged both sides with our own comments and questions.

...

It was a lively debate, but for me the most memorable part of it was a powerful short video (posted below) highlighting the global unemployment crisis that was shown at the start of the program. Before the audience was let into the auditorium, the CNBC crew was doing a technical run-through with Maria Bartiromo, who was moderating the debate. So I got to watch the video five or six times in a row. And each time its potent mix of doomsday music, depressing statistics, and images of global unemployment (especially among the young) and political unrest really hit me. So when the debate started, I told the audience: "This video should be played at the White House and in every Congressional office every single morning until unemployment drops to pre-recession levels." Watching it leaves you feeling like you can't just sit there -- you have to do something before it's too late. It reminded me of the time Bobby Kennedy, as Attorney General, brought his brother's Cabinet to his office at the Justice Department and locked the door, forcing them to stay there for four hours discussing how to best address the crisis of poverty in America. I was ready to lock the doors of the Congress Centre auditorium until we had determined to do something concrete about unemployment.

Here's the video:

One of the biggest non sequiturs about this whole situation is the fact that the US gives $1.5 billion a year to Egypt. What! We borrow $1.5 from the Chinese, add it to our deficit and then give it to Egypt. And Egypt isn't the only recipient of billions borrowed from the Chinese and added to US debt. The US gives Israel $3 billion a year which is added to the deficit and borrowed from the Chinese. And yet Republicans are trying to foment a war against social security, Medicaid and Medicare. We have to cut the legs out from under American citizens while we blow billions on other countries which amounts are probably going to make their corrupt elites richer while not "trickling down" to ordinary citizens.

And did you notice that the Egyptians are not clamoring for democracy and freedom; they're clamoring for jobs. I'm sure the American power structure wishes that the protests were all about democracy and freedom and becoming more like us. But they aren't. They're about jobs, jobs, jobs, the same mantra that is being chanted here in the US but on a less disruptive level.

It looks like our boy Mubarak will have to go and the Egyptian youth may not accept a substitute. They might want a radically new government - one that can provide them with jobs, jobs, jobs. It's not likely to look like American capitalism which has brought the world disparity, disparity, disparity - fantastic wealth for a few and misery for the masses. The Muslim brotherhood is waiting in the wings. It preaches that Islam enjoins man to strive for social justice, the eradication of poverty and corruption, and political freedom to the extent allowed by the laws of Islam. The Brotherhood strongly opposes Western colonialism, and helped overthrow the pro-western monarchies in Egypt and other Muslim nations during the early 20th century. As Sayyid Qutb, an Islamic intellectual and supporter of the Brotherhood wrote in his 1963 book, Milestones, (Ma'alim fi al-Tariq), "The leadership of mankind by Western man is now on the decline, not because Western culture has become poor materially or because its economic and military power has become weak. The period of the Western system has come to an end primarily because it is deprived of those life-giving values, which enabled it to be the leader of mankind. It is necessary for the new leadership to preserve and develop the material fruits of the creative genius of Europe, and also to provide mankind with such high ideals and values as have so far remained undiscovered by mankind, and which will also acquaint humanity with a way of life which is harmonious with human nature, which is positive and constructive, and which is practicable. Islam is the only System which possesses these values and this way of life."

Obviously, the Muslim Brotherhood represents a threat to Western democracy and capitalism because the values upon which it is based are a direct contradiction to Western values. They are largely communitarian rather than individualistic values. Having been outlawed in Egypt, the Muslim Brotherhood may now make a resurgence, and, since this is a pan-Arabic movement, there may be upheaval throughout the Arab world. The problem there which is similar to the problem in the US is that democracy and capitalism have not produced sufficient jobs to keep huge numbers of people out of poverty while the upper 1% live with immense wealth.

January 27, 2011

Obama's SOTU speech was all about jobs, jobs, jobs. But what seems to be his preferred mode for creating them? Most of Obama's stimulus spending was in the form of tax cuts, and, in order to get the Bush tax cuts extended for the middle class, Obama had to go along with extending them for the wealthy as well. Anything that Obama proposes that doesn't involve tax cuts is vehemently opposed by Republicans in Congress. The result is that few jobs are created because tax cuts are ineffective at creating jobs. The second result is that the Federal government goes deeper into debt because tax cuts essentially defund the Federal government. Republicans know that these are the guaranteed results; they're no dummies. And these are exactly the results they want. The non-creation of jobs will guarantee that Obama will be a one term President. The further indebtedness of the Federal government will enable them to rant and rail against the continuation of social programs like social security, Medicare and Medicaid. Presto, these are exactly the results they want.

The only thing accomplished by tax cuts is that the rich will get richer and this is Republicans' primary goal. They are there to serve their constituents: the wealthy (of whom they are a part) and large corporations for whom they drill loopholes into the tax code. You might say that they really believe that tax cuts will create jobs. Nonsense. Their rhetoric would lead you to believe that, but their rhetoric is one thing. Their rhetoric is what they want the public to believe not what they believe. They are for all intents and purposes bald faced liars. Look at it this way. Most Congresspersons are lawyers. Lawyers to a great extent are bald faced liars. When a defense lawyer tries to persuade a jury that his client is innocent when he knows the client is guilty, he is bald faced lying in order to persuade a group of people that what he knows is a lie is actually the truth.

No one with the least knowledge of history can really believe that tax cuts, especially tax cuts for the wealthy, will really create jobs. All you have to do is look at the history of the George W Bush administration. Bush cut taxes. The result was the government went into huge debt. Two wars were unpaid for. The prescription drug benefit for Medicare recipients was unpaid for. The Federal government debt went from $5 trillion to $10 trillion. In addition those debt accumulations are ongoing since the wars and the drug benefit are ongoing. No jobs were created during the eight years of the Bush administration as in NONE, NADA, ZIP. No clearer proof is needed that the result of tax cuts is threefold:

1) the wealthy get wealthier

2) the Federal government gets more indebted and

3) no jobs are created.

But these are precisely the results Republicans want! Their protestations to the contrary, they don't really believe that tax cuts will create jobs. That's what they want you to believe.

But here is what would create jobs for the least amount of government expenditures. Direct job creation by instituting a jobs program similar to the Works Progress Administration that was put into place by FDR in the 1930s would create jobs and bring the unemployment rate down. But Republicans are totally against this. According to them, this would be socialism. But according to them social security and Medicare are socialism. Any government expenditure except on war is socialism. The result of their anti-socialism diatribes is that the government becomes more indebted and no jobs are created. They treat socialism as anathema even though our major NATO allies in Europe are socialist in many respects and socialist countries such as Norway are more entrepreneurial than the US. Other major players on the world stage have not been caught in this downward spiral of lost jobs and decreased government revenues leading to more lost jobs and more government indebtedness. They have maintained a strong position on their government's balance sheet by means of sovereign wealth funds and other creative means of revenue enhancement. But the American government seems to be too dumb and too stuck in their ideological straitjackets to even conceive of doing that.

Clinton balanced the budget and created 22 million new jobs. Here are some of the results of the Clinton administration:

1) 22.2 million new jobs were created since 1993 -- the most jobs ever created under a single administration, and more jobs than Presidents Reagan and Bush created during their three terms. Under President Clinton, the economy added an average of 245,000248,000 jobs per month, the highest of any President on record. This compares to 52,000 per month under President Bush and 167,000 per month under President Reagan.

2) Unemployment was down from 7.5 percent to 3.9 percent, the lowest in more than three decades. The unemployment rate fell for seven years in a row, and remained below 5 percent for 37 months in a row -- over three full years.

3) Median family income increased from $42,612 in 1993 to $48,950 in 1999 - an $6,338 increase. In contrast, median family income fell from $44,354 in 1988 to $42,490 in 1992.

4) Real wages rose 6.66.5 percent since 1993, compared to declining 4.3 percent during the Reagan and Bush years. Real wage growth in 1998 reached 2.6 percent -- the largest increase since 1972. Wages increased five years in a row -- the longest consecutive increase since the 1960s.

5) 15 million additional working families received additional tax relief through the President’s expansion of the Earned Income Tax Credit. In 1999, the EITC lifted 4.1 million out of poverty -- nearly double the number who were removed from poverty in 1993. Over half of the people removed from poverty by the EITC (2.3 million) were children under the age of 18.

It is time that the public stopped being fooled by Republicans. Their main goal is to serve their clients - the wealthy - and to fool enough of the public to get themselves elected. They do this by means of their talk radio and TV echo chamber and elected Republicans who mouth the talking points that we must eliminate social programs and cut taxes. When they control the government, they place incompetents in high positions to make sure that "government doesn't work."

Unfortunately, Obama seems either to have been taken in by Republican rhetoric or he has been forced to compromise with them in order to get anything done. They accuse him of being a socialist at every turn despite the fact that he has embraced their positions both rhetorically and in actual point of fact. The opposite rhetorical points have been left to a few lone voices crying out in the wilderness like Congressmen Dennis Kucinich, Bernie Sanders and Anthony Weiner. Unfortunately, a staunch supporter of rhetorical reality, Keith Olberman, is gone while the right wing echo chamber barrels on. It seems like the left wing is squelched. Who knows what will happen to the other lefties on msnbc, Rachel Maddow, Ed Schultz and others. They might go the way of Air America now that Comcast has taken over NBC Universal as corporate owner. Left wing talking points are not conceived to be in the interests of major corporations.

January 22, 2011

Whenever you hear a business executive or politician use the term “American competitiveness,” watch your wallet. Few terms in public discourse have gone so directly from obscurity to meaninglessness without any intervening period of coherence.

President Obama just appointed Jeffry Immelt, GE’s CEO, to head his outside panel of economic advisors, replacing Paul Volcker. According to White House spokesman Robert Gibbs, Immelt has “agreed to work thorugh what makes our country more competitive.”

In an opinion piece in the Washington Post announcing his acceptance, Immelt wrote “there is nothing inevitable about America’s declining manufacturing competitiveness if we work together to reverse it.”

But what’s American “competitiveness” and how do you measure it? Here are some different definitions:

— It’s American exports. Okay, but the easiest way for American companies to increase their exports from the US is for their American-made products to become cheaper internationally. And for them to reduce the price of their American-made stuff they have to cut their costs of production in here. Their biggest cost is their payrolls. So it follows that the simplest way for them to become more “competitive” is to cut their payrolls — either by substituting software and automated machinery for their US workers, or getting (or forcing) their US workers to accept wage and benefit cuts.

— It’s net exports. Another way to think about American “competitiveness” is the balance of trade — how much we import from abroad versus how much they import from us. The easiest and most direct way to improve the trade balance is to coax the value of the dollar down relative to foreign currencies (the Fed’s current strategy for flooding the economy with money could have this effect). The result is everything we make becomes cheaper to the rest of the world. But even if other nations were willing to let this happen (doubtful; we’d probably have a currency war instead as they tried to coax down the value of their currencies in response), we’d pay a high price. Everything the rest of the world makes would become more expensive for us.

— It’s the profits of American-based companies. In case you haven’t noticed, the profits of American corporations are soaring. That’s largely because sales from their foreign-based operations are booming (especially in China, Brazil, and India). It’s also because they’ve cut their costs of production in the US (see the first item above). American-based companies have become global — making and selling all over the world — so their profitability has little or nothing to do with the number and quality of jobs here in the US. In fact, it may be inversely related.

— It’s the number and quality of American jobs. This is my preferred definition, but on this measure we’re doing terribly badly. Most Americans are imprisoned in a terrible tradeoff — they can get a job, but only one that pays considerably less than the one they used to have, or they can face unemployment or insecure contract work. The only sure way to improve the quality of jobs over the long term is to build the productivity of American workers and the US overall, which means major investments in education, infrastructure, and basic R&D. But it’s far from clear American corporations and their executives will pay the taxes needed to make these investments. And the only sure way to improve the number of jobs is to give the vast middle and working classes of America sufficient purchasing power to get the economy going again. But here again, it’s far from clear American corporations and their executives will be willing to push for a more progressive tax code, along with wage subsidies, that would put more money into average workers’ pockets.

It’s politically important for President Obama, as for any president, to be available to American business, and to avoid the moniker of beiing “anti-business.” But the President must not be seduced into believing — and must not allow the public to be similarly seduced into thinking — that the well-being of American business is synonymous with the well-being of Americans.

President Obama is waxing ebullient on the jobs front. He's partnered up with GE CEO Jeffrey Immelt, and they are both proclaiming that the US will again be a robust manufacturing and exporting nation. They have rejected the model for the US as a mainly consuming and service oriented nation. That's all to the good. But Obama seems to have placed too much faith in the corporate CEOs. He seems to think they're going to stop outsourcing, and, out of the goodness of their hearts, they're going to start creating jobs here at home. But the official US government still has in place laws and policies - and in particular tax policies - that actually encourage outsourcing. Nancy Pelosi, when the Democrats controlled the House, said after passing a bill which would have reined in outsourcing: "In this legislation, which is job creating, it closes the loophole which has allowed businesses to ship jobs overseas. Can you believe that we have a tax policy that enables outsourcing? So if you have one thing to say about this bill to your constituents, you can say that today, you voted to close the loophole to ship U.S. jobs overseas and giving businesses a tax break to do so. It is not right. It will be corrected today.” This was in May, 2010. Of course, this bill never made it into law because it was filibustered by Republicans in the Senate. Sorry, Nancy.

Closing the loophole that has allowed businesses to ship jobs overseas? Well, sorry to say that loophole was never closed! President Obama though wants us to believe that, regardless of that loophole being closed, CEOs like Jeffrey Immelt are going to be nice guys and create local manufacturing jobs here in the US even though it is going to lower their profit margins, even though the loopholes for shipping jobs overseas are still open! Is he being naive? And then there is this from Robert Reich:

General Electric and other companies are signing up for deals with China involving energy and aviation manufacturing. But much of this will be done in China. GE’s joint venture with Aviation Industries of China, to develop new integrated avionics systems (which presumably will find their way into Boeing planes) will be based in Shanghai.

Will the real GE please stand up? Corporations are required by law to maximize their profits. This means that they will lower their expenses by getting the cheapest labor wherever they can get it. And American labor is relatively expensive compared to Chinese labor. So Obama is skating on thin ice. His bravado overlooks the underpinnings of law that give American corporations huge incentives for creating jobs overseas and outsourcing American jobs. Sure, GE wants to sell to the Chinese. But this doesn't mean that those products will be exported from the US. In the last ten years 42,000 American factories have closed. Millions of jobs have been lost. And now Mr. Nice Guy, Jeffrey Immelt of GE, is going to forego maximizing profits and his salary and his duty to shareholders in order to do a favor for President Obama and create some jobs in the US? What game is he playing? Mr. President, where are the legal underpinnings that would make sure that this will happen? You have a Congress that won't even close loopholes that would encourage job creation in the US. Do you have the feeling you're teetering on the brink? You said you've moved us back from the abyss. But have you? The abyss still looms because now for sure with a Republican controlled House, no loopholes that encourage and enable outsourcing will ever be closed unless and until Democrats control both Houses and the filibuster rules have been changed. Mr. President, you are whistling Dixie, in the dark, and past the graveyard too!

BEIJING — Aided by at least $43 million in assistance from the government of Massachusetts and an innovative solar energy technology, Evergreen Solar emerged in the last three years as the third-largest maker of solar panels in the United States.

But now the company is closing its main American factory, laying off the 800 workers by the end of March and shifting production to a joint venture with a Chinese company in central China. Evergreen cited the much higher government support available in China.

It looks like the right hand doesn't know what the left hand's doing. It seems like not only does China have cheaper labor, but they have more government support for American companies that want to build plants and create jobs there! The US on the other hand has no industrial policy, no set of incentives in order to have companies, domestic or foreign, build more plants in the US. And there are no unions to speak of that would fight for the rights of American workers. America, for all intents and purposes, has been deunionized starting with Reagan's firing of the air traffic controllers which effectively put their PATCO union out of business.

The United States is rapidly becoming the very first "post-industrial" nation on the globe. All great economic empires eventually become fat and lazy and squander the great wealth that their forefathers have left them, but the pace at which America is accomplishing this is absolutely amazing. It was America that was at the forefront of the industrial revolution.

It was America that showed the world how to mass produce everything from automobiles to televisions to airplanes. It was the great American manufacturing base that crushed Germany and Japan in World War II. But now we are witnessing the deindustrialization of America. Tens of thousands of factories have left the United States in the past decade alone. Millions upon millions of manufacturing jobs have been lost in the same time period.The United States has become a nation that consumes everything in sight and yet produces increasingly little. Do you know what our biggest export is today?

Waste paper. Yes, trash is the number one thing that we ship out to the rest of the world as we voraciously blow our money on whatever the rest of the world wants to sell to us. The United States has become bloated and spoiled, and our economy is now just a shadow of what it once was. Once upon a time America could literally outproduce the rest of the world combined. Today that is no longer true, but Americans sure do consume more than anyone else in the world. If the deindustrialization of America continues at this current pace, what possible kind of a future are we going to be leaving to our children?

The US is embarked on its own destruction thanks to the "small government" mantra of the Republican controlled Congress. Small government means no industrial policy except by lobbyists seeking special favors for their particular corporate sponsors. It means that US government policy will favor US business but not necessarily US workers. Unless and until the US can adopt policies which favor job creation in the US, US workers will be left out in the cold. And President Obama's soaring rhetoric about cooperation with CEOs like Jeffrey Immelt will be just that: rhetoric.

January 07, 2011

After a week of promising signs for an improving economy, the news from Friday's Bureau of Labor Statistics report on the state of jobs in America is bleaker than anticipated.

Although the unemployment rate fell to 9.4 percent from 9.8 percent in December, bringing the total number of officially unemployed Americans to 14.5 million, only 103,000 jobs were added in December according to the Labor Department's BLS report -- a number significantly lower than expected. (The Wall Street Journalreported that many Wall Street analysts were predicting "at or above 200,000" new jobs.)

The news gets worse: less than half of the drop in unemployment rate can be attributed to new job creation -- the other half came from 260,000 Americans who have dropped out of the labor force altogether. This brings the percentage of Americans who are either employed or actively looking for work down to 64.3 percent, what economist Heidi Shierholz calls "a stunning new low for the recession."

"The overarching story here is that this represents the continued slog of the recovery." Shierholz, of the Washington, D.C.-based Economic Policy Institute, said. "It's the same old bright spots that we've been seeing, we continue to see: temporary help services, health jobs, restaurants and bars -- all up." The report shows some growth in health care and leisure services, with most other industries staying static.

"Hiring is picking up. but I think this report underlies that it's going to be a gradual process," IHS Chief U.S. Economist Nigel Gault said. "Overall it wasn't a bad report." Gault added though, that we really need twice this many jobs added per month, month after month, to see any substantial improvement in the unemployment rate.

In December, hispanic and black Americans continued to be hit hardest by unemployment. "I think this is the lowest employment-to-population ratio we've ever had for Hispanic Americans," economist Dean Baker said, also noting a 2.2 percent raise in the unemployment rate for Hispanic bringing the unemployment percent up to 32.2 (not seasonally adjusted).

For all the economists we spoke to, the drop in the labor force stuck out as the most arresting detail. "We have now added jobs every single month for a year," Schierholz said. "So you would think that there would be labor force growth, these missing workers starting to come back in. Not only is that not happening, it's actually starting to go in the other direction. There's never been a pool of missing workers this large. It's not clear to me when they'll come back."

January 06, 2011

The unemployment rate remains high - around 10% - but this Friday's BLS Employment Situation Summary may actually show a decrease in unemployment. Eventually, the unemployment situation will improve even as the financial position of the middle class continues to erode. Here in a nutshell is why: people will eventually give up on finding a job equivalent to their last one and will be forced to take any job including huge paycuts just to put food on the table. This means that former engineers will end up driving taxicabs, former middle managers earning $100K will start working at Target and Wal-Mart and former computer programmers will end up working as baristas at Starbucks. The BLS unemployment statistics don't take into account whether or not an employee finds a job commensurate in qualifications and remuneration with the person's most recent job. They only take into account whether or not a person is working - i.e. "has a job".

Obviously, unemployment benefits allow a person to have a certain period of time to find a job commensurate with their abilities and at a compensation point to which they had become accustomed. When those benefits run out, people are forced to take whatever low level jobs might be lying around. Most of these jobs will involve sales. There are always plenty of commission only sales jobs available. Of course, pay is totally dependent on ability to sell. Temp jobs and telephone sales jobs will replace former middle class jobs, and, for the people involved, will represent a huge step down both in prestige and compensation.

This whole process represents a further hollowing out of the middle class - replacing middle class jobs with jobs in the fast food industry, jobs at major retailers like Wal-Mart and Target and telephone sales jobs. It's not a question of whether or not there are jobs available; it's a question of what kind of jobs are available. The labor market does not care. The metrics just show whether or not people are working, not whether or not previously unemployed people found a job similar to the one they lost both in qualifications and compensation.

The main goal of corporate America is not to create manufacturing jobs or jobs of any other sort which can be expeditiously outsourced to China and India. What they need help with is not manufacturing but in selling. That's why supply side economics is so ridiculous. There is so much supply that corporate America's only interest is to find ways to stuff all the products down the throats of the American public since 70% of GDP is consumption. Therefore, the American public needs to be forced to consume. The economy will suffer and GDP will go down if they don't. This is why sales jobs are so important to corporate America, but at the same time they have to be commission only jobs without any base pay. Base pay is a waste of money if the salesperson doesn't perform.

The only source of good middle class jobs that's left is with the military-industrial complex because it is flush with money. The US spends more on its military-industrial complex than all the rest of the countries of the world combined. You have to go where the money is, and they are flush with money. You might get a middle class job with Boeing, GE or Exxon Mobil or with the US Defense Department. Try the Pentagon. These jobs have good benefits and pay well. The commercial sector is mainly missing in action when it comes to creating American jobs. They have been pretty good lately at creating jobs overseas. With Republicans having more influence in Washington, you can kiss extended unemployment benefits good-bye while money will be literally shoveled into the Defense Department and the military. The military has always been the employer of last resort, and, if you don't mind working in the military-industrial complex (I do), you could land yourself a pretty good middle class job there.

Tomorrow, when the employment situation summary comes out, the prediction is that some 400,000 jobs will have been created. It will be interesting to see whether or not they will be quality jobs or minimum wage jobs.

December 31, 2010

Along with the staggering theft in broad daylight of Americans' assets that has occurred in the course of the ongoing financial crisis, as taxpayers funded multi-trillion bank bailouts and banks stole homes through foreclosures with the help of fraudulent paperwork, American companies have also been picking the pockets of workers more directly.

This second round of paycheck theft has come in the form of stolen productivity gains.

Historically, the relatively high and rising standard of living of American workers--both blue and white-collar--which once gave the US one of the highest standards of living in the world, has come courtesy of rising productivity, which has allowed US companies to produce more goods with less labor, and to then pass some of the enhanced profits on to workers in the form of higher wages, without having to raise prices. That has been important because, when higher wages are financed by higher prices, it tends to be a kind of zero-sum game: higher wages cancelled out by inflation.

But beginning in 2000, the old system already creaky, broke down. (It must be noted that this system was never the result of the capitalists' largesse, but rather was because of a tighter labor market and, critically, a powerful labor movement.)

The corporate onslaught against trade unions and against the minimum wage, which began with the Nixon administration in 1968, combined with so-called "free-trade" deals that allowed US companies to shift production overseas and then to freely import the products of their overseas production facilities back for sale to Americans at home, by weakening the power of workers to demand higher wages, has led to a situation where companies can just pocket all the profits from productivity gains, leaving wages stagnant, or even driving them down.

The recession that began in late 2007 has only made matters worse, giving owners and managers to opportunity to really hammer employees. With real unemployment and underemployment now running at close to 20%, employees are in no position to press for higher wages, even as those who are still working are putting in extra effort to keep their jobs, thus pushing productivity gains even higher.

The figures speak for themselves.

According to the Bureau of Labor Statistics, productivity gains during the 1990-1999 decade averaged just 2.1% per year. The prior decade, from 1980-1989, the average productivity gain was 1.5% per year. But between 2000 and 2009, when the economy suffered two recessions, the average annual productivity gain has been 2.9%, almost 50% higher than the prior decade, and almost double the rate in the 1980s.

During this same period, however, wages have actually declined. According to the BLS, wages in 2010 rose 0.1%, but inflation, running at an official (and grossly under-measured) 1%, more than ate that up. According to the Economic Policy Institute, a Washington think tank, for the whole decade from 2000 through 2009, wages actually sank for most people. In 2000, the median weekly wage for a high school graduate was $629. By the end of 2009, high school graduates were earning a median weekly wage, in inflation-adjusted dollars, of just $626--three dollars a week less than a decade earlier. A college degree didn't change things, either. In 2000, the median weekly wage for a college grad was $1030, but that had fallen to $1025 by the end of 2009.

Remember, all during that decade, companies were seeing productivity gains averaging almost 3% per year. If 50% of that gain in productivity annually had gone to workers, as might have been typical back 30 years ago when unions were stronger and before Congress gave away the store by signing onto the World Trade Organization and the North American Free Trade Act and similar trade agreements, that high school grad would have been earning $729 a week in inflation-adjusted dollars by 2009, while the college grad would have been earning $1,195.

Of course as a whole, Americans have been doing even worse, because these are just the mean wages of people who are working full weeks. In fact, many companies have been laying off workers, and making the remaining workers, desperate to hang on to their jobs, work harder to produce the same amount of product, meaning that besides not getting any pay increase, they are producing much more profit for the boss. Many workers who are still hanging onto their jobs are actually working fewer hours, and thus are taking home smaller paychecks, all of which goes into that higher productivity figure for output per worker the government is reporting.

Indeed, the Wall Street Journal recently reported glowingly that US production of goods and services had returned to its 2007 pre-recession level, but this is with unemployment running at an official rate of 9.8 percent, and an actual rate of about 19 percent.

What we're witnessing is a massive national "speed-up" which is enriching the owners of capital, while the workers are getting stiffed. It is the payoff to the ruling class for decades of hammering of trade unions, and also of trade unions cutting deals with the Democratic Party, which in turn has refused to defend workers' interests. Look at the sell-out of Labor during the first two years of the Obama administration. The union movement's one big issue--restoring some measure of fairness to the Labor Relations Act, so that it would be at least possible to organize unions and to win contracts and improved wages and working conditions--was dropped without even a fight by the Obama administration and the leadership of the House and Senate. The government, fully in the hands of Democrats, has also continued to sign trade agreements, most recently with Korea, that further shift jobs overseas, thus further weakening the position of workers here at home.

A cynic might speculate that this is also why the Democrats have refused for over three years now to come up with any real public jobs program despite the desperate straits of tens of millions of jobless people who have been without work for more than a year. The Democrats, in thrall to corporate interests, would on the evidence much rather spend $50 billion on a program of extended unemployment benefits that leaves those millions of people hungry for any real job, than spend that same sum on providing them with government jobs, as that would actually reduce unemployment and increase the bargaining power of all workers vis-a-vis employers.

Meanwhile, the national corporate media, itself viciously anti-union, continue to skew news coverage to portray unions as corrupt and greedy, so that the 90 percent of American workers who are not in a union don't even realize that any pay gains or benefits they get are because employers are trying to avoid unionization of their workforce.

Unless Americans wake up soon to how this process is impoverishing us all, we will see this shifting income and wealth to the top strata of the population continue until most of us are little more than modern-day serfs.

A start would be for people to at least recognize that this stagnation and decline in incomes we're witnessing is not some natural phenomenon. It is, no less than the fat salaries, perks and bonuses paid by corporate managers to themselves, simply another manifestation of corporate greed gone wild.

Books

Doug Ramsey: Take Five: The Public and Private Lives of Paul DesmondThis is a great book! Paul Desmond and Dave Brubeck formed the heart of one of the best all time jazz groups. Paul was the quintessential intellectual, white jazz musician. A talented writer, he never published anything. However author, Doug Ramsey has collected Paul's letters here. How ironic that now his writing in the form of letters to his father and ex-wife, among others, is finally published showing another window on the mind of this talented person.
A sideman, for the most part, his entire life, the Dave Brubeck Quartet might never have happened at all due to the fact that Paul had managed to offend Dave to the point where he never wanted to see him again. It had to do with a gig that Paul actually was the leader of. Paul wanted to take the summer off to play another gig, and Dave wanted Paul to let him take over the gig at the Band Box in Palo Alto, CA. Paul wouldn't let him and Dave, married with two children, proceeded to starve.
Due to an elaborate publicity campaign, when he realized the error of his ways, Paul managed to worm himself back into Dave's good graces. The rest is history.
This book is remarkable for the insight it gives into a working jazz musician's mind, wonderful pictures and interviews with the significant figures in Paul's life. Author Ramsey, not a remarkable penman himself, has nevertheless done a magnificent job of assembling all these various materials. Unlike a lot of jazz authors, he doesn't overly idolize his subject with the result that you get the feeling that you have met a real person and not a idealized version. That's high praise indeed for any biographer. (*****)